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John Jones owns and manages a cafe in Collegetown whose annual revenue is $5000 Annual expenses are as follows Labor $2000 Food and drink

John Jones owns and manages a cafe in Collegetown whose annual revenue is $5,000. Annual expenses are as follows: Labor………………………………………… $2,000 Food and drink………………………………… 500 Electricity…………………………………….. 100 Vehicle lease………………………………… 150 Rent………………………………………….. 500 Interest on loan for equipment…………………… 1,000 a. Calculate John s annual accounting profit. b. John could earn $1,000 per year as a recycler of aluminum cans. However, he prefers to run the cafe. In fact, he would be willing to pay up to $275 per year to run the cafe rather than to recycle. Is the cafe making an economic profit? Should John stay in the cafe business? Explain.

Apr 04 2020 Read more Less More

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