John is the owner of “Down Town Pizza & Salad Bar” (NY). At the end of the year, John has the following information: Total Revenue = $290,000. Wages = $58,000, rent = $28,000, material & ingredients = $46,000, and utilities = $12,000. Also, Pizza Hut just offered him a job earning of $78,000. John invested $32,000 of his own savings in a new industrial oven. The oven at the end of the year can be sold at $18,000. The interest rate at the end of the year is 3.2%. According to this information, what would you advice? John should continue the business because economic profits are positive. John should continue the business because accounting profits are positive. John should continue the business because accounting profits are higher than economic profits. John should not continue the business because economic profits are less than accounting profits.
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John is the owner of “Down Town Pizza & Salad Bar” (NY). At the end of the year, John has the following information: Total Revenue = $290,000. Wages = $58,000, rent = $28,000, material & ingredients = $46,000, and utilities = $12,000. Also, Pizza Hut just offered him a job earning of $78,000. John invested $32,000 of his own savings in a new industrial oven. The oven at the end of the year can be sold at $18,000. The interest rate at the end of the year is 3.2%. According to this information, what would you advice?
John should continue the business because economic profits are positive.
John should continue the business because accounting profits are positive.
John should continue the business because accounting profits are higher than economic profits.
John should not continue the business because economic profits are less than accounting profits.
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