Sam quit his job and started his own business. He made a $100,000 salary at his old job. The company paid $10,000 a year for his family's health insurance premium and paid him $5,000 in profit sharing in the year. He owns some commercial property that he used to rent out and make $20,000 a year. Now he uses that property for his new business. With his new business, in his first year, he paid his production workers $125,000. He paid a salesperson $60,000 in commissions. His gas and utilities came to $12,000. He put in $50,000 of his own money that he could have made 2% a year in the bank. He also spent $14,000 in advertising and $20,000 for a business consultant. In his first year as a business owner, Sam made $300,000 in sales.
Sam quit his job and started his own business. He made a $100,000 salary at his old job. The company paid $10,000 a year for his family's health insurance premium and paid him $5,000 in profit sharing in the year. He owns some commercial property that he used to rent out and make $20,000 a year. Now he uses that property for his new business. With his new business, in his first year, he paid his production workers $125,000. He paid a salesperson $60,000 in commissions. His gas and utilities came to $12,000. He put in $50,000 of his own money that he could have made 2% a year in the bank. He also spent $14,000 in advertising and $20,000 for a business consultant. In his first year as a business owner, Sam made $300,000 in sales.
Economics Today and Tomorrow, Student Edition
1st Edition
ISBN:9780078747663
Author:McGraw-Hill
Publisher:McGraw-Hill
Chapter10: Financing And Producing Goods
Section: Chapter Questions
Problem 4AA
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Question
![Sam quit his job and started his own business. He made a $100,000 salary at his old job. The
company paid $10,000 a year for his family's health insurance premium and paid him $5,000 in
profit sharing in the year. He owns some commercial property that he used to rent out and make
$20,000 a year. Now he uses that property for his new business. With his new business, in his first
year, he paid his production workers $125,000. He paid a salesperson $60,000 in commissions.
His gas and utilities came to $12,000. He put in $50,000 of his own money that he could have
made 2% a year in the bank. He also spent $14,000 in advertising and $20,000 for a business
consultant.
In his first year as a business owner, Sam made $300,000 in sales.
1. What are his explicit costs? Be sure to list out all of the explicit costs so that I can give partial
credit if need be.
2. What are his implicit costs? Be sure to list out all of the explicit costs so that I can give partial
credit if need be.
3. What is his accounting profit or loss?
4. What is his economic profit or loss? Or did he break even?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fa21231ba-dc5a-475b-b0cd-6772a708ac7e%2Ff41e5042-4b45-4a45-a373-fc75eeb1a94f%2Fu85u8cp_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Sam quit his job and started his own business. He made a $100,000 salary at his old job. The
company paid $10,000 a year for his family's health insurance premium and paid him $5,000 in
profit sharing in the year. He owns some commercial property that he used to rent out and make
$20,000 a year. Now he uses that property for his new business. With his new business, in his first
year, he paid his production workers $125,000. He paid a salesperson $60,000 in commissions.
His gas and utilities came to $12,000. He put in $50,000 of his own money that he could have
made 2% a year in the bank. He also spent $14,000 in advertising and $20,000 for a business
consultant.
In his first year as a business owner, Sam made $300,000 in sales.
1. What are his explicit costs? Be sure to list out all of the explicit costs so that I can give partial
credit if need be.
2. What are his implicit costs? Be sure to list out all of the explicit costs so that I can give partial
credit if need be.
3. What is his accounting profit or loss?
4. What is his economic profit or loss? Or did he break even?
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