Essay
Before Sam quit his job as a hairdresser, he was earning $34,000 per year. He rented an office for $18,000 per year and opened a framing shop. He spends $88,000 per year for labor, materials, utilities, and advertising.
(i) How much revenue will the business have to earn in order to break even in terms of business profit?
(ii) How much revenue will the business have to earn in order to break even in economic terms?
(iii) Suppose that Sam buys the building. How will this influence the amount that the business will have to earn in order to break even in economic terms? In accounting terms?
Correct Answer:
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(i) Accounting cost = 18,000 + 88,000 = ...View Answer
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