Henri quit his job as a teacher earning AUD 70,000 per year to start his own food kiosk business. To save on rent, Henri utilized his own property. He normally earned AUD 50,000 annual rent from this property. Also, to start the business, Henri used AUD 60,000 from his own savings which he earned 4% interest per year. Further in order to start the business, Henri borrowed $40,000.00 from the bank and was paying 6% interest per year. Henri’s first year of business can be summarized as follows: Item Amount $ Revenue- Food section 250,000 Revenue- Liquor 180,000 Revenue-Soft drinks 40,000 2 Cashiers expense (wages per worker) (30,000) Food van (100,000) Manager wages (60,000) Food preservatives (30,000) Equipment expense (60,000) Motorcycle expense to ease movement in city (30,000) 2 food freezers (cost per freezer) (5000) Based on your calculations of accounting profit and economic profit, would you advise Henri to return to his teaching job or continue with the food kiosk business? Show your work!
Henri quit his job as a teacher earning AUD 70,000 per year to start his own food kiosk business. To save on rent, Henri utilized his own property. He normally earned AUD 50,000 annual rent from this property. Also, to start the business, Henri used AUD 60,000 from his own savings which he earned 4% interest per year. Further in order to start the business, Henri borrowed $40,000.00 from the bank and was paying 6% interest per year.
Henri’s first year of business can be summarized as follows:
|
Item |
Amount $ |
|
Revenue- Food section |
250,000 |
|
Revenue- Liquor |
180,000 |
|
Revenue-Soft drinks |
40,000 |
|
2 Cashiers expense (wages per worker) |
(30,000) |
|
Food van |
(100,000) |
|
Manager wages |
(60,000) |
|
Food preservatives |
(30,000) |
|
Equipment expense |
(60,000) |
|
Motorcycle expense to ease movement in city |
(30,000) |
|
2 food freezers (cost per freezer) |
(5000) |
Based on your calculations of accounting profit and economic profit, would you advise Henri to return to his teaching job or continue with the food kiosk business?
Show your work!
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