Mustansir is the owner of small pottery firm. He has hired one helper at Rs. 15,500/= per month, pays annual rent of 144,000/=, spends around 19,000/= on materials. He has 400,000/= of his own funds invested in equipment like pottery wheels, kilns and so forth that could lead him to earn 50,000 per year if alternatively, invested. He was also offered by his competitor to work as a potter and earn 60,000/= per month. He estimated his entrepreneurial skills worth Rs. 53,000 per year. Although total annual revenue from the pottery sales is 9,650,000. Calculate the accounting and economic profit of Mustansir’s pottery firm and comment on the situation that whether he should continue doing the business or shut down.
Mustansir is the owner of small pottery firm. He has hired one helper at Rs. 15,500/= per month,
pays annual rent of 144,000/=, spends around 19,000/= on materials. He has 400,000/= of his own
funds invested in equipment like pottery wheels, kilns and so forth that could lead him to earn
50,000 per year if alternatively, invested. He was also offered by his competitor to work as a potter
and earn 60,000/= per month. He estimated his entrepreneurial skills worth Rs. 53,000 per year.
Although total annual revenue from the pottery sales is 9,650,000. Calculate the accounting and
economic profit of Mustansir’s pottery firm and comment on the situation that whether he should
continue doing the business or shut down.
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