John was a high school teacher earning $ 80,000 per year. He quit his job to start his own business in pizza catering. To learn how to run the pizza catering business, John enrolled in a TAFE to acquire catering skills. John’s course was for 3 months. John had to pay $2,000 as tuition for the 3 months. After the training, John withdrew $110,000 from his savings account. He had been earning 5 percent interest per year for this account. He also borrowed $50,000.00 from his friend whom he pays 6 percent interest per year. John’s first year of business can be summarised as follows: Item Amount $ Revenue 250,000 Labor cost 120,000 Pizza ingredients 50,000 Equipment 10,000 Calculate John’s accounting profit and economic profit? Show your work.
John was a high school teacher earning $ 80,000 per year. He quit his job to start his own business in pizza catering. To learn how to run the pizza catering business, John enrolled in a TAFE to acquire catering skills.
John’s course was for 3 months. John had to pay $2,000 as tuition for the 3 months.
After the training, John withdrew $110,000 from his savings account. He had been earning 5 percent interest per year for this account. He also borrowed $50,000.00 from his friend whom he pays 6 percent interest per year.
John’s first year of business can be summarised as follows:
|
Item |
Amount $ |
|
Revenue |
250,000 |
|
Labor cost |
120,000 |
|
Pizza ingredients |
50,000 |
|
Equipment |
10,000 |
Calculate John’s accounting profit and economic profit? Show your work.
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