You are currently in a job as a chef in a restaurant earning $100,000 per year. You are considering opening up a restaurant in a building which you currently own. You estimate that, if you wanted to, you could rent out your building for $25,000 per year to another restaurant.Last year, your revenues and expenses from the restaurant were the following:Revenues $400,000Cost of Food $120,000Salaries/Wages $100,000Utilities $25,000Taxes $20,000 What is your accounting profit? Show your calculationsWhat is your economic profit? Show your calculationsAssuming that you are indifferent between being a chef or owning a restaurant, should you open up your restaurant? Explain why.Now suppose that instead of owning the building where your restaurant will be located, you had to pay rent of $25,000 per year for the building. Will your answers to parts 1-3 change? Show your calculations. Explain how and why your answers will change or not change. Just need assistance with Question # 4

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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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You are currently in a job as a chef in a restaurant earning $100,000 per year. You are considering opening up a restaurant in a building which you currently own. You estimate that, if you wanted to, you could rent out your building for $25,000 per year to another restaurant.

Last year, your revenues and expenses from the restaurant were the following:

Revenues            $400,000
Cost of Food        $120,000
Salaries/Wages   $100,000
Utilities                 $25,000
Taxes                   $20,000

What is your accounting profit? Show your calculations
What is your economic profit? Show your calculations
Assuming that you are indifferent between being a chef or owning a restaurant, should you open up your restaurant? Explain why.
Now suppose that instead of owning the building where your restaurant will be located, you had to pay rent of $25,000 per year for the building. Will your answers to parts 1-3 change? Show your calculations. Explain how and why your answers will change or not change.

Just need assistance with Question # 4

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