Mary Smith is the owner and manager of a small bakery, “Mary’s Cookies”, which is known for its special gigantic almond-chocolate chip cookies. She has been offered a job by Cookie Monster, Inc., to come to work for them at $110,000 per year. Currently, she is producing her own cookies and she has revenues of $260,000 per year. Her costs are $10,000 for rent, $35,000 for ingredients, $5,000 for utilities, and $80,000 for wages, including $40,000 for Mary in concept of manager’s salary. She has $100,000 of her own money invested in the operation, which if she leaves, can be sold for $40,000 that she can invest at 8.2% per year. Using this information, calculate: Accounting profits = $ Economic profits = $ If instead, Mary pays herself no salary: Accounting profits = $ Economic profits = $

Mary Smith is the owner and manager of a small bakery, “Mary’s Cookies”, which is known for its special gigantic almond-chocolate chip cookies. She has been offered a job by Cookie Monster, Inc., to come to work for them at $110,000 per year. Currently, she is producing her own cookies and she has revenues of $260,000 per year. Her costs are $10,000 for rent, $35,000 for ingredients, $5,000 for utilities, and $80,000 for wages, including $40,000 for Mary in concept of manager’s salary. She has $100,000 of her own money invested in the operation, which if she leaves, can be sold for $40,000 that she can invest at 8.2% per year. Using this information, calculate: Accounting profits = $ Economic profits = $ If instead, Mary pays herself no salary: Accounting profits = $ Economic profits = $

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter16: Tax Research

Section: Chapter Questions

Problem 64DNC

See similar textbooks

Similar questions

ASAP 1)Claire wants to start her own dog treat business. She can purchase a suitable factory for $250,000. Claire currently has $135,000 in the bank earning 6 percent interest per year. Suppose Claire purchases the factory using her own money and then borrows the rest from the bank at 6%. Claire also has to pay other costs of running her business in the amount of $15420 per month. These costs include paying for energy, heat and salary and benefits to workers. (The value of the business is not considered a cost. The business is an asset that retains its value and can be sold if the owner wishes.) a. What is Claire’s annual implicit cost of purchasing the factory? b. What is Claire’s annual explicit cost of purchasing the factory? c. If Claire brings in annual total revenue of $300,000 what is her annual economic profit?
Jordan opens her own custom sign business where she sells a sign for $80 a piece. She has been able to sell 20 signs per month. Her costs of materials to make the signs is $15 and she is paying sales tax of $4 per sign. In addition, she purchased online ads for $300 per month and pays for printing of $100 per month. To be able to run the business, Jordan has reduced her hours so her salary fell from $3,000 per month to $2,600 per month and she no longer rents out the studio apartment at her home for $500 per month. Calculate the below for Jordan's monthly financial statement. Total Sales Revenue Total Explicit Cost Accounting Profit Total Implicit Cost Total Economic Profit
Monique has a flock of six chickens in her backyard that she initially bought for $6 each. Theflock currently lays 20 eggs per week, which Monique and her family consume at home, andher current cost of feed is $2 per week. Monique has a job that pays $8/hour with flexiblehours, but she is thinking of selling her chickens’ eggs to earn extra income. To start sellingeggs, she would need to increase production to 30 eggs per week. She can do this by increasingthe chickens’ feed to $3 per week and taking an hour off work each week to devote to chickenrearing. If the market price of her farm-fresh eggs is $1 per egg, what would be Monique’sweekly economic profits from selling her chickens’ eggs? (Select one.)(a) −$9: This is her revenue minus her accounting cost.(b) −$1: This is her revenue minus her production cost.(c) $0: Eggs are a constant-cost market so producers must earn 0 profits.(d) $1: This is her revenue minus her economic cost.(e) $7: This is her revenue minus her accounting…
Veronica Valentine works as a financial consultant as her sideline which earns her approximately 35,000 a month. She however, has a full time job as a supervisor in one of the big corporations in the City. Her full time job pays her 84,950 per month and has benefits like: rice allowance of 5,000 per quarter; uniform allowance of 8,000 per year; meal allowance of 70 pesos per day(she works 26 days a month); representation allowance of 8900 per month; communication allowance of 3,000 per month. The company pays 14' month pay @100% of her monthly pay and a 15* month pay which is 60% of her monthly pay. Given the above stated data,compute for her. a.Monthly take home pay. b.It was found that at the end of the year,Ms. Valentine has accumulated a total of 15 hours tardiness.With this data in mind,compute for her total income tax to be paid to the government considering both sources of income.
Staci Valek began dabbling in pottery several years ago as a hobby. Her work is quite creative, and it hasbeen so popular with friends and others that she has decided to quit her job with an aerospace company andmanufacture pottery full time. The salary from Staci’s aerospace job is $3,800 per month.Staci will rent a small building near her home to use as a place for manufacturing the pottery. Therent will be $500 per month. She estimates that the cost of clay and glaze will be $2 for each finishedpiece of pottery. She will hire workers to produce the pottery at a labor rate of $8 per pot. To sell herpots, Staci feels that she must advertise heavily in the local area. An advertising agency states that it willhandle all advertising for a fee of $600 per month. Staci’s brother will sell the pots; he will be paid acommission of $4 for each pot sold. Equipment needed to manufacture the pots will be rented at a costof $300 per month.Staci has already paid the legal and filing fees…
Three years ago, Dorothy Taylor started a business that creates and delivers holiday and birthday gift baskets to students at the local university. Dorothy sells the baskets for $33 each, and her variable costs are $23 per basket. She incurs $11,600 in fixed costs each year. (a) How many baskets will Dorothy have to sell this year if she wants to earn $28,000 in operating income? (Round answer to O decimal places, eg. 5,275) baskets
Tina, an entrepreneurial business student, wants to set up a business completing tax forms for other students. Her price would be $41.00 for each job. Fixed expenses include $150.00 for the tax software which Tina would purchase. Tina would hire some accounting students to complete the forms, paying them for two hours at $13 per hour for each job. She would also have paper and supplies costs of $5 per job. How many jobs would she have to generate before she starts to make a profit? Make the assumption that it takes an accounting student two hours to complete one tax return.
Anny had been cutting hair for years and decided she wanted to open up a salon of her own. In order to do so, she knew she would need 3 new chairs at $1575 each; 3 mirrors at $199 each; 3 tables at $425 each; and the list went on - hairdryers, sinks, a cash register, etc. By the time she was finished, Anny's supplies totaled $7788.25, including sales tax. The supplier offered in-house financing of 24 monthly payments at $332.44 per month, with a 10% down payment. a) Find the amount financed, installment price, and the finance charge, presuming Anny goes with the financing available from her supplier.
Three years ago, Marissa Moore started a business that creates and delivers holiday and birthday gift baskets to students at the local university. Marissa sells the baskets for $25 each, and her variable costs are $15 per basket. She incurs $12,000 in fixed costs each year. How many baskets will Marissa have to sell this year if she wants to earn $30,000 in operating income? (Round answer to 0 decimal places, e.g. 5,275.)
Seiko's current salary is $98,500. Her marginal tax rate is 32% and she fancies European sports cars. She purchases a new auto every year. Seiko is currently a manager for Idaho Supply Company. Her friend, knowing her interest in sports cars, tells her about a manager position at the local BMW and Porche dealer. The new position pays only $87,100 per year, but it allows employees to purchase one new car per year at a discount of $17,700. This discount qualifies as a non-taxable fringe benefit. In an effort to keep Seiko as an employee, Idaho Supply Company offers her a $12,400 raise. Answer the following questions about this analysis. (a) What is the annual after-tax cost to the Idaho Supply Company with the $12,400 increase? (Ignore payroll taxes) (b-1) Financially which offer is better on an after-tax basis? (b-2) By how much is the offer better for Seiko on an after tax basis (Assume that Seiko is going to purchase the car whether she switches jobs or not)
Mr. Salim runs a carpentering business in his village. Mr. Salim’s business has expanded, with revenue now reaching 40,000 per year. Mr. Salim is considering moving his business into town centre premises, and employing another carpenter, who would cost 6,000 per year. He has found premises that could be leased for 3,500 per year payable in advance. Mr. Salim currently advertises his business in the local newspapers and business directories, at a cost of 1,000 per year payable in advance. Mr. Salim will carry on with this advertising, but he will also need extensive ‘one off’ advertising to promote the move to the new premises. This ‘one off’ advertising in the local newspapers will cost 2,000, which will be paid immediately. In addition to advertising the move in the local newspapers, Mr. Salim could advertise the move on the local radio. The cost of this would be 5,000, also payable immediately. Mr. Salim believes that having a town centre presence and the associated publicity in the…
George runs a coffee shop. His total sales are $107,758 per month. He has the following monthly expenses: rent is $5,140 wage expense is $21,076 material supplies are $10,545. George owns the building where he has his coffee shop. He could rent this space for $11,766 per month. If George only cares about earning the maximum income possible, what is the minimum monthly salary he would have to earn at his next best employment opportunity to get him to close his coffee shop? Enter a whole number with no dollar sign.