Jamie is considering leaving her current job, which pays $75,000 per year, to start a new company that develops applications for smart phones. Based on market research, she can sell about 50,000 units during the first year at a price of $4 per unit. With annual overhead costs and operating expenses amounting to $145,000, Jamie expects a profit margin of 20 percent. During the first year, Jamie is using her savings to cover total costs. Current annual rate of return on saving is 2.1%. This margin is 5 percent larger than that of her largest competitor, Apps, Inc. Instructions: Rround up your answers to no decimal. Do not round values if needed to complete other calculations. Use commas (30,000 instead of 30000). a. If Jamie decides to embark on her new venture, Accounting costs: $ Economic costs: $ Opportunity costs: $ b. Suppose that Jamie’s estimated selling price is lower than originally projected during the first year. How much revenue would she need in order to earn positive accounting profits? Positive economic profits? Revenue needed to earn positive accounting profits: $ Revenue needed to earn positive economic profits: $
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Jamie is considering leaving her current job, which pays $75,000 per year, to start a new company that develops applications for smart phones. Based on
market research , she can sell about 50,000 units during the first year at a price of $4 per unit. With annual overhead costs and operating expenses amounting to $145,000, Jamie expects a profit margin of 20 percent. During the first year, Jamie is using her savings to cover total costs. Current annualrate of return on saving is 2.1%. This margin is 5 percent larger than that of her largest competitor, Apps, Inc.Instructions: Rround up your answers to no decimal. Do not round values if needed to complete other calculations. Use commas (30,000 instead of 30000).
a. If Jamie decides to embark on her new venture,
Accounting costs: $Economic costs: $
Opportunity costs: $
b. Suppose that Jamie’s estimated selling price is lower than originally projected during the first year. How much revenue would she need in order to earn positive accounting profits? Positive economic profits?
Revenue needed to earn positive accounting profits: $
Revenue needed to earn positive economic profits: $
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