Robert a highly successful manager, quit his job in a large retail store so that he could start his own practice. He has been in his own business for a little over one year. He has a building and pays
$40,000 mortgage payments
He took out $200.000 which he had in a Time Deposit (CD) that was making 8% a year and put it in
his checking account that is making 0% Interest, He will use that money for the explicit cost
expenses he has for his new business which you will see in this problem
He must pay $7.000 a year in property taxes. He hired a contract software developer to write an
Inventory software system for $160,000 for the year. His revenues in the first year were $350.000.
Thomas earned $200.000 he was with that large retail form. He also got 560.000 a year in profit
sharing each year. His advertising for his first year came to $40,000. His electricity and gas usage
came to $20,000 for the year.
1. List the explicit costs and then list the implicit costs. Be sure to properly LABEL them so that
can give partial credit if you make a mistake.
2. For the year, his accounting profit for loss) is -
and his economic profit for loss) is
3. Did he make an economic profit an economic loss or did he break even? What does his economic
profit breakeven, or economic loss result mean?