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Nat2105 [25]
2 years ago
14

John Jones owns and manages a café in Collegetown whose annual revenue is $5,000. Annual expenses are as follows:

Business
1 answer:
OleMash [197]2 years ago
8 0

Answer:

a.) $750

b.) Yes, the café is making an economic profit of $25 per year.

Yes, he should stay in the café business.

c.) No, the café is making an economic loss of $75 per year

No, he should not stay in the café business.

d.)$3,250

e.) $250

Explanation:

a) John's accounting profit is his revenue minus his explicit costs:$5,000 - $4,250 = $750

b) In this case, John's opportunity cost of running the café is $725 per year ($1,000 − $275 = $725). Thus, the café is making an economic profit of $25 per year ($5,000 − $4,250 − $725 = $25). Since the café is earning an economic profit, John should stay in the café business.

c) In this case, John's opportunity cost of running the cafe is $825 per year ($1,100 − $275 = $825). Thus, the cafe is earning an economic loss of $75 per year ($5,000 − $4,250 − $825 = −$75). Since the café is earning an economic loss, John should not stay in the café business.

d) John's accounting profit equals his revenue minus his explicit costs. If he doesn't need a loan, then his explicit costs equal $3,250. So, his accounting profit equals $1,750 (= $5,000 − $3,250).

e) To earn a normal profit, the café would have to cover all its implicit and explicit costs. The opportunity cost of John's time is $1,000 per year while the café's accounting profit is only $750 per year. Thus, the café would have to earn additional revenues of $250 per year in order for John to make a normal profit.

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8 0
3 years ago
Hutter Corporation declared a $0.50 per share cash dividend on its common shares. The company has 20,000 shares authorized, 9,00
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Answer:

O Debit Retained Earnings $4,000; credit Common Dividends Payable $4,000.

Explanation:

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As outstanding shares are only eligible shares for the dividend payment.

Total Dividend Payment = $0.5 per share x 8000 shares

Total Dividend Payment = $4000

Journal Entry for this event

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Retained Earning    $4,000

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8 0
3 years ago
______ refers to a set of unspoken guidelines that employees share in various work situations. Organizational theory Organizatio
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Organizational culture refers to a set of unspoken guidelines that employees share in various work situations.

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3 0
3 years ago
Brian lives in Chicago and runs a business that sells pianos. In an average year, he receives $793,000 from selling pianos. Of t
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Answer:

Brian

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Implicit costs:

The rental income Brian could receive if he chose to rent out his showroom

The salary Brian could earn if he worked as a financial advisor

Explicit costs:

The wages and utility bills that Brian pays

The wholesale cost for the pianos that Brian pays the manufacturer

2. Brian's accounting and economic profit of his piano business:

Accounting profit = $62,000

Economic profit (loss) = ($3,000)

Explanation:

a) Data and Calculations:

                               Accounting Profit     Economic Profit

Sales Revenue            $793,000                $793,000

Cost of pianos              430,000                   430,000

Wages and utility bills   301,000                    301,000

Implicit (Opportunity) Costs:

Rent                                                                   15,000

Salary as an accountant                                  50,000

Total costs                    731,000                    796,000

Profit (loss)                  $62,000                     ($3,000)

b) Implicit costs are opportunity costs.  They include the costs that arise from forgone benefits when another opportunity is taken instead of the other.  Explicit costs are costs that are actually incurred by taking an opportunity.

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likoan [24]

Answer:

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