4. Mr.Wang plans to leave his job as a professor of a college to open his own outdoors goods store. He forecasts the income statement of a normal year as follows: Revenues ¥310,000 Revenue from sales of goods and services Operating costs and expenses Cost of products and services sold Selling expenses Administrative expenses Total operating costs and expenses ¥92,000 ¥6,000 ¥12,000 ¥100,000 Gross margin from operations Interest expense (bank loan) Non-recurring expenses to start business ¥100,000 ¥4,000 ¥18,000 Income taxes ¥6,000 Net income ¥72,000 Mr.Wang's teaching job earns him ¥65,000 of annual salary and benefits. To get his outdoors goods store opened, Wang used ¥20,000 of his savings at bank, which is earning a guaranteed 10 percent annual rate of return. Wang's store will use the business floor space he bought before, and the floor space is now rented out in return for the rental of ¥10,000 per year. (1) How much is the estimated total explicit costs for using market-supplied resources? (2) What will be the opportunity cost of Wang's equity capital? (3) How much is the total implicit cost of using owner-supplied resources? (4) What is the total economic cost of the resources used by the store? (5) How much is the accounting profit for the would-be store? (6) Economically considering, should Mr.Wang quit his teaching job to start his own outdoors goods or not? Explain your answer in detail.
4. Mr.Wang plans to leave his job as a professor of a college to open his own outdoors goods store. He forecasts the income statement of a normal year as follows: Revenues ¥310,000 Revenue from sales of goods and services Operating costs and expenses Cost of products and services sold Selling expenses Administrative expenses Total operating costs and expenses ¥92,000 ¥6,000 ¥12,000 ¥100,000 Gross margin from operations Interest expense (bank loan) Non-recurring expenses to start business ¥100,000 ¥4,000 ¥18,000 Income taxes ¥6,000 Net income ¥72,000 Mr.Wang's teaching job earns him ¥65,000 of annual salary and benefits. To get his outdoors goods store opened, Wang used ¥20,000 of his savings at bank, which is earning a guaranteed 10 percent annual rate of return. Wang's store will use the business floor space he bought before, and the floor space is now rented out in return for the rental of ¥10,000 per year. (1) How much is the estimated total explicit costs for using market-supplied resources? (2) What will be the opportunity cost of Wang's equity capital? (3) How much is the total implicit cost of using owner-supplied resources? (4) What is the total economic cost of the resources used by the store? (5) How much is the accounting profit for the would-be store? (6) Economically considering, should Mr.Wang quit his teaching job to start his own outdoors goods or not? Explain your answer in detail.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:4. Mr.Wang plans to leave his job as a professor of a college to open his own outdoors goods store. He
forecasts the income statement of a normal year as follows:
Revenues
Revenue from sales of goods and services
Operating costs and expenses
Cost of products and services sold
Selling expenses
Administrative expenses
Total operating costs and expenses
Gross margin from operations
Interest expense (bank loan)
Non-recurring expenses to start business
¥310,000
¥92,000
¥6,000
¥12,000
¥100,000
¥100,000
¥4,000
¥18,000
Income taxes
¥6,000
Net income
¥72,000
Mr.Wang's teaching job earns him ¥65,000 of annual salary and benefits. To get his outdoors goods store
opened, Wang used ¥20,000 of his savings at bank, which is earning a guaranteed 10 percent annual rate of
return. Wang's store will use the business floor space he bought before, and the floor space is now rented out
in return for the rental of ¥10,000 per year.
(1) How much is the estimated total explicit costs for using market-supplied resources?
(2) What will be the opportunity cost of Wang's equity capital?
(3) How much is the total implicit cost of using owner-supplied resources?
(4) What is the total economic cost of the resources used by the store?
(5) How much is the accounting profit for the would-be store?
(6) Economically considering, should Mr.Wang quit his teaching job to start his own outdoors goods or
not? Explain your answer in detail.
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