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Assignment #1 Managerial Economics (ECON 501) Name ID Note: This assignment contains Learning outcomes K1, K2, SI and S2 as stipulated in the course syllabus
Assignment #1 Managerial Economics (ECON 501) Name ID Note: This assignment contains Learning outcomes K1, K2, SI and S2 as stipulated in the course syllabus Part I. Problem Solving At the beginning of the year an audio engineer quit his job and gave up a salary of 175.00 per year to start his own business Sound Devices Inc. The company builds, installs and maintains custom audio equipment for business that require high-quality audio-systems. A partial income statement for the first year of operation for Sound Devices Inc. is shown below: Revenue Revenue from sales of product and services 970,000 Operating cost and expenses $355,000 Cost of products and services sold $155,000 Selling Expenses $45,000 Administrative Expenses Total Operating cost and expenses 555,000 $415,000 Income from operations $45,000 Interest expenses (Bank Loan) $28,000 Legal Expenses to start business $165,000 Income taxes $177,000 Net Income To get started, the owner of Sound Devices spent $100,000 of his personal savings to pay for some of the capital equipment used in the business. During the first year of operation, the owner of Sound Devices Inc., could have earned a 15% return by investing in stocks of other new business with risk levels similar to the risk level at Sound Devices Inc. A. What are the total explicit, total implicit and total economic cost for the year? B. What is the accounting profit of Sound Devices Inc
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