Florence is considering going into business for herself and has developed the following estimates of monthly costs and revenues to aid her in her decision-making process
She has decided to house the business in a building that she already owns, although she could rent the building to someone else for $1,000 per month. Estimated payments for utilities (electricity, natural gas, water, and telephone) are $475 per month. She will hire one employee at a total cost of $1,100 per month. Inventory is estimated to cost $2,800 per month. Finally, Florence earns $3,000 a month in her current job. a. How much monthly revenue would Florence have to take in to earn 0 economic profit? b. Assume that Florence has estimated her monthly revenue to be $9,000. In this case, Florence would earn an accounting profit (loss) of ________, and an economic profit (loss) of ________. c. Assume instead that Florence does not own a building, and that she will have to rent a building for $1,000 per month (all other estimates remain the same). In this case (assuming estimated monthly revenue is still $9,000), Florence would earn an accounting profit (loss) of ________, and an economic profit (loss) of ________. Fill in the blank(s) with correct word
a. $8375.
b. Accounting profit = $4,625. Economic profit = $625.
c. Accounting profit = $3,625. Economic profit = $625.
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