1. What was the cost of the resources Mike’s Bikes bought in the marketplace last year? Mike operates a bike retail store and repair shop, Mike’s Bikes.

Some data about the firm and industry:

◆ Last year, the market value of the firm’s showroom and workshop increased from £600,000 to £675,000;

the market value of the inventory of unsold bikes decreased from £400,000 to £320,000; and the market value of the firm’s tools remained constant at £5,000.

◆ The firm paid manufacturers £770,000 for bikes.

◆ The cost of electricity and IT services was £25,000.

◆ The wages paid to shop assistants were £50,000.

◆ Mike is the firm’s entrepreneur. He also works parttime at a bike manufacturer that pays £40 per hour. The manufacturer wants Mike to work full time, but instead he does repairs at Mike’s Bikes for 10 hours a week.

◆ Normal profit in bike retailing is £40,000 per year.

◆ The interest rate is 5 per cent per year.