Ruth Brennan is evaluating two options. The first option is to open her own legal practice. Based on her business plan, she computed the following annual estimates using very conservative assumptions: Total revenue = $320,000 Purchases = $100,000 Utility costs = $37,000 Part-time Administrative Assistant = $45,000 Ruth will operate the business by herself. She will operate the business from a building that she owns. The building has been paid in full. The second option is to work for a law firm as a legal associate. Her annual salary would be $95,000. She could also rent her building for $74,000 per year. Compare and contrast the accounting profit and economic profit of each of the two options
Ruth Brennan is evaluating two options. The first option is to open her own legal practice. Based on her business plan, she computed the following annual estimates using very conservative assumptions: Total revenue = $320,000 Purchases = $100,000 Utility costs = $37,000 Part-time Administrative Assistant = $45,000 Ruth will operate the business by herself. She will operate the business from a building that she owns. The building has been paid in full. The second option is to work for a law firm as a legal associate. Her annual salary would be $95,000. She could also rent her building for $74,000 per year. Compare and contrast the accounting profit and economic profit of each of the two options
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Ruth Brennan is evaluating two options. The first option is to open her own legal practice. Based on her business plan, she computed the following annual estimates using very conservative assumptions:
- Total revenue = $320,000
- Purchases = $100,000
- Utility costs = $37,000
- Part-time Administrative Assistant = $45,000
Ruth will operate the business by herself. She will operate the business from a building that she owns. The building has been paid in full.
The second option is to work for a law firm as a legal associate. Her annual salary would be $95,000. She could also rent her building for $74,000 per year.
Compare and contrast the accounting profit and economic profit of each of the two options.
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