Jill took $50,000 that she had in savings and started her own business. If left

Question

Jill took $50,000 that she had in savings and started her own business. If left in investments, she would have earned $5,000 this year. Jill also left a job that paid her $70,000 a year and plans on paying herself $40,000. Materials and other labor costs will be $80,000. The company is located in a building that Jill owns. She has an insurance and mortgage payment of $20,000. She could have rented the building out for $40,000 What are the accounting and economic costs? The accounting cost is S and the economic cost is so

Explanation / Answer

Answer.) Accounting costs = $140,000; Economic costs = $195,000

Accounting costs = Jill income + Material and labor costs + insurance and mortgage = $140,000

The economic cost includes the accounting cost ($140,000) plus the implicit cost of net forgone wages ($70,000-$40,000) plus foregone interest earnings ($5,000), plus net foregone rental earnings ($40,000-$20,000).

Related Questions

Navigate

• Browse (All)
• Browse J
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.