George Robinson recently fulfilled his long-time dream of opening a gym that offers spinning exercise classes for $10 per person. To differentiate his gym and better serve his clients, George provides a towel, a bottle of water, and an after-workout protein shake to each person participating in a class, at a cost of $1.90 per person. George employs four part-time instructors and pays them each $2,500 per month. He also pays himself a monthly salary of $7,000. George's other monthly costs are $3,000 for rent, $2,000 for depreciation on his 34 bikes, and $1,775 in utilities and insurance.

George Robinson recently fulfilled his long-time dream of opening a gym that offers spinning exercise classes for $10 per person. To differentiate his gym and better serve his clients, George provides a towel, a bottle of water, and an after-workout protein shake to each person participating in a class, at a cost of $1.90 per person. George employs four part-time instructors and pays them each $2,500 per month. He also pays himself a monthly salary of $7,000. George's other monthly costs are $3,000 for rent, $2,000 for depreciation on his 34 bikes, and $1,775 in utilities and insurance.

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter6: Business Expenses

Section: Chapter Questions

Problem 22P

See similar textbooks

Similar questions

Bridget Youhzi works for a large firm. Her alma mater has asked her to make a presentation to the upcoming accounting honor societys annual scholarship dinner. Her firm supports the presentation because it hopes to recruit more excellent employees like Bridget. The university is 196 miles from her office. In order to get to the dinner by 5:00 p.m., she will need to leave work at 1:00 pm. She can drive her personal car and be reimbursed $0.50 per mile. The dinner ends at 9:00 p.m. Company policy allows her to spend the night if the return trip is tour hours or more. There is a student-run inn and conference center across the street from campus that charges $101 per night. Instead of driving, she could catch a 3:00 p.m. flight that has a round, trip fare of $300. Flying would require her to rent a car for $39 per day and pay an airport parking fee of $25 for the day. The company pays a per diem of $35 for incidentals if the employee spends at least six hours out of town. (The per diem would be for one 24-hour period for either flying or driving.) As a manager, Bridget is responsible for recruiting within a budget and wants to determine which is more economical. Use the information provided to answer these questions. A. What is the total amount of expenses Bridget would include on her expense report if she drives? B. What is the total amount of expenses she would include on her expense report if she flies? C. What is the relevant cost of driving? D. What is the relevant cost of flying? E. What is the differential cost of flying over driving? F. What other factors should Bridget consider in her decision between driving and flying?
Myrna White is a mobile housekeeper. The price for a standard house cleaning is $150 and takes 5 hours. Each worker is paid $25/hour, uses $15 of materials and $0.50 per mile to use their own vehicle to travel from job to job. The average job is 5 miles. Arniz Meyroyan has a family reunion at her house and needs her house freshened up. She offers $75 for this emergency tidy-up service. This service includes vacuuming and cleaning floors, dusting, and cleaning the bathrooms. Only $5 of materials would be used. A. Prepare an Excel spread sheet to determine the differential income if the emergency tidy-up service is priced at $75. The tidy-up service will take 2 hours. B. If a $25 surcharge was included to make the price of $100 how would the differential income change? C. If the hourly worker rate increased to $30/hour, how would net income change? D. What other issue would you need to consider?
Garth Grits works as an employee at Superior Foods, a local supermarket. As an employee, Garth earns $17 per hour and works 200 hours per month. Garth currently supplements his income with the interest he earns from having $30,000 in a savings account earning 5% annual interest. Instead of continuing to work for Superior Foods, Garth would like to start up his own dollar store called Just-a-Buck located in a strip mall close to his home. If Garth starts up Just-a-Buck, he would quit his job working for Superior Foods, and he would work full-time (200 hours per month) in his new business. To set up Just-a-Buck, Garth would have to use his $30,000 savings to buy the necessary equipment and make the appropriate renovations to the mall space he plans to rent. Garth hired an accountant who estimated the annual revenue and costs of Just-a-Buck as follows: Annual Store Sales $175000 Less Annual Expenses: Mall Rent (includes utilities) $10000 Cost of…
Melissa recently paid $400 for round-trip airfare to San Francisco to attend a business conference for three days. Melissa also paid the following expenses: $250 fee to register for the conference, $300 per night for three nights' lodging, $200 for meals in restaurants, and $150 for cab fare. a) What amount of these costs can Melissa deduct as business expenses? b) Suppose that while Melissa was on the coast, she also spent two days sightseeing the national parks in the area. To do the sightseeing, she paid $1,000 for transportation, $800 for lodging, and $450 for meals during this part of her trip, which she considers personal in nature. What amount of these costs can Melissa deduct as business expenses? c) Suppose that Melissa made the trip to San Francisco primarily to visit the national parks and only attended the business conference as an incidental benefit of being present on the coast at that time. What amount of the airfare can Melissa deduct as a business expense? d) Suppose…
LaMont works for a company in downtown Chicago. The firm encourages employees to use public transportation (to save the environment) by providing them with transit passes at a cost of $270 per month. a. If LaMont receives one pass (worth $270) each month, how much of this benefit must he include in his gross income each year? b. If the company provides each employee with $270 per month in parking benefits, how much of the parking benefit must LaMont include in his gross income each year?
George runs a coffee shop. His total sales are $107,758 per month. He has the following monthly expenses: rent is $5,140 wage expense is $21,076 material supplies are $10,545. George owns the building where he has his coffee shop. He could rent this space for $11,766 per month. If George only cares about earning the maximum income possible, what is the minimum monthly salary he would have to earn at his next best employment opportunity to get him to close his coffee shop? Enter a whole number with no dollar sign.
An undergraduate engineering student and her husband operate a pet-sitting service to help make ends meet. They want to add a daily service of a photo placed online for pet owners who are traveling. The estimates are: equipment and setup cost $950; net monthly income over costs $70. Over a period of 3 years, will the service make at least 12% per year compounded monthly?
Jenny Noon operates a Bed and Breakfast Inn in a resort area in the Ozark Mountains. The rooms rent at an average price of $60.00 per person per night (including meals). Depreciation on the inn is $40,000 per year. Jenny employs a part-time maintenance person at an annual salary of $17,000 per year and a cleaning person at an annual salary of $19,000 per year. Real estate taxes are $5,000 per year. Other costs are laundry service at a cost of $2.50 per person per night and the cost of food which is $3.50 per person per night. (Assume all guests will use the laundry service and eat their evening meal). Jenny is considering upgrading the breakfast service to attract more business and increase prices. This will increase Jenny’s food costs by $6.00 per person per night. Jenny feels she can increase the room rate charged to guests to $79.50 per person per night. Determine the dollar amount AND the number of guest rentals Jenny needs to break-even if the changes are made. Can…
Jenny Noon operates a Bed and Breakfast Inn in a resort area in the Ozark Mountains. The rooms rent at an average price of $60.00 per person per night (including meals). Depreciation on the inn is $40,000 per year. Jenny employs a part-time maintenance person at an annual salary of $17,000 per year and a cleaning person at an annual salary of $19,000 per year. Real estate taxes are $5,000 per year. Other costs are laundry service at a cost of $2.50 per person per night and the cost of food which is $3.50 per person per night. (Assume all guests will use the laundry service and eat their evening meal). Determine the dollar amount AND the number of guest rentals Jenny needs to break-even. Can you show your workings please?
Ali is a student at the University. He recently purchased a car for OMRS, 000 to use it for going to the University. Ali also expects that other friends might ask for transportation from him. He expects a total monthly revenue of OMR70. He expects fuel cost to be OMR60 per month. One of Ali's friends is a taxi driver. He offered Ali to take him to University for a monthly fee of OMR10, Because he does not have to drive, Ali believes that he can perform online work that would earn him a monthly revenue of OMR30. What is the differential cost in this scenario? Select one: O a. OMR10 O b. OMR50 Oc. OMR30 Od. OMR40 O e. OMR20
Georgie provides a service where she teaches yoga to people through Zoom. She works from a small rented studio, for which she pays £200 per month. She also pays a further £50 per month to advertise on a health and fitness website. She has no other costs to pay. Georgie charges £30 per hour for lessons and teaches for 60 hours each month. Calculate Georgie’s monthly fixed cost Calculate Georgie’s monthly revenue Calculate Georgie’s monthly profit State and explain one way in which Georgie might be able to increase her monthly profit State and explain one potential problem or weakness with this method
Mary Smith is the owner and manager of a small bakery, “Mary’s Cookies”, which is known for its special gigantic almond-chocolate chip cookies. She has been offered a job by Cookie Monster, Inc., to come to work for them at $110,000 per year. Currently, she is producing her own cookies and she has revenues of $260,000 per year. Her costs are $10,000 for rent, $35,000 for ingredients, $5,000 for utilities, and $80,000 for wages, including $40,000 for Mary in concept of manager’s salary. She has $100,000 of her own money invested in the operation, which if she leaves, can be sold for $40,000 that she can invest at 8.2% per year. Using this information, calculate: Accounting profits = $ Economic profits = $ If instead, Mary pays herself no salary: Accounting profits = $ Economic profits = $