Jim’s Consulting is owned by James Smith. For the past year, Jim’s Consulting had the following revenues and costs → Revenues $600,000 Supplies $20,000 Electricity and water $10,000 Employees’ salaries $300,000 Jim’s salary $250,000 James has the option of shutting down and renting the building he owns for $60,000 per year. Additionally, James could work for a larger consulting house for $275,000 per year. Answer the following: What is Jim’s Consulting’s accounting cost? What is Jim’s Consulting’s economic cost? What is Jim’s Consulting’s economic profit?
Jim’s Consulting is owned by James Smith. For the past year, Jim’s Consulting had the following revenues and costs → Revenues $600,000 Supplies $20,000 Electricity and water $10,000 Employees’ salaries $300,000 Jim’s salary $250,000 James has the option of shutting down and renting the building he owns for $60,000 per year. Additionally, James could work for a larger consulting house for $275,000 per year. Answer the following: What is Jim’s Consulting’s accounting cost? What is Jim’s Consulting’s economic cost? What is Jim’s Consulting’s economic profit?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Jim’s Consulting is owned by James Smith. For the past year, Jim’s Consulting had the following revenues and costs →
|
Revenues |
$600,000 |
|
Supplies |
$20,000 |
|
Electricity and water |
$10,000 |
|
Employees’ salaries |
$300,000 |
|
Jim’s salary |
$250,000 |
James has the option of shutting down and renting the building he owns for $60,000 per year. Additionally, James could work for a larger consulting house for $275,000 per year.
Answer the following:
- What is Jim’s Consulting’s accounting cost?
- What is Jim’s Consulting’s economic cost?
- What is Jim’s Consulting’s economic profit?
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Based on these answers, should James continue operating the company?
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