John was a high school teacher earning $ 80,000 per year. He quit his job to start his own business in pizza catering. In order to learn how to run the pizza catering business, John enrolled in a TAFE to acquire catering skills. John's course was for 3 months. John had to pay $2,000 as tuition for the 3 months. After the training, John withdrew $110,000 from his savings account. He had been earning 5 percent interest per year for this account. He also borrowed $50,000.00 from his friend whom he pays 6 percent interest per year. Further, to start the business John used his own premises. He was receiving $12,000 from rent per year. Finally, to start the business John uses $50,000 he had been given by his father to go on holiday to USA. John's first year of business can be summarised as follows: Item Amount $ 400,000 190,000 55,000 50,000 75,000 60,000 10,000 Revenue- Pizza Section Revenue- Beverages Section 2 Cashiers (wages per worker) Pizza ingredients Manager 3 Pizza bakers (wages per baker) Equipment Based on your calculated accounting profit and economic profit, would you advise John to return to his teaching job? Show your work
John was a high school teacher earning $ 80,000 per year. He quit his job to start his own business in pizza catering. In order to learn how to run the pizza catering business, John enrolled in a TAFE to acquire catering skills. John's course was for 3 months. John had to pay $2,000 as tuition for the 3 months. After the training, John withdrew $110,000 from his savings account. He had been earning 5 percent interest per year for this account. He also borrowed $50,000.00 from his friend whom he pays 6 percent interest per year. Further, to start the business John used his own premises. He was receiving $12,000 from rent per year. Finally, to start the business John uses $50,000 he had been given by his father to go on holiday to USA. John's first year of business can be summarised as follows: Item Amount $ 400,000 190,000 55,000 50,000 75,000 60,000 10,000 Revenue- Pizza Section Revenue- Beverages Section 2 Cashiers (wages per worker) Pizza ingredients Manager 3 Pizza bakers (wages per baker) Equipment Based on your calculated accounting profit and economic profit, would you advise John to return to his teaching job? Show your work
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
Transcribed Image Text:John was a high school teacher earning $ 80,000 per year. He quit his job to start his
own business in pizza catering. In order to learn how to run the pizza catering
business, John enrolled in a TAFE to acquire catering skills. John's course was for 3
months. John had to pay $2,000 as tuition for the 3 months.
After the training, John withdrew $110,000 from his savings account. He had been
earning 5 percent interest per year for this account. He also borrowed $50,000.00 from
his friend whom he pays 6 percent interest per year. Further, to start the business
John used his own premises. He was receiving $12,000 from rent per year. Finally, to
start the business John uses $50,000 he had been given by his father to go on holiday
to USA.
John's first year of business can be summarised as follows:
Item
Amount $
400,000
190,000
55,000
50,000
75,000
60,000
10,000
Revenue- Pizza Section
Revenue- Beverages Section
2 Cashiers (wages per worker)
Pizza ingredients
Manager
3 Pizza bakers (wages per baker)
Equipment
Based on your calculated accounting profit and economic profit, would you advise
John to return to his teaching job? Show your work
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