Assume James was a secondary teacher in the Philippines earning AUD 1,464.82 per month (Philippines Peso equivalent). In August, after the typhoon Haiyan devastation, James decided to migrate to Melbourne, Australia to start a Mango Juice And Cake Bakery kiosk.

Before starting the business, James’ uncle decided to offer him a bicycle shop. James calculated he could earn AUD 1,500 per month selling bicycles. But James wanted to succeed in his Mango Juice and Cake Bakery business so he decided to use the bicycle shop for the mango juice and cake bakery kiosk.

During the month of August, James summarised the costs of the business. The table below represents the August business summary.

a) Calculate James’ total cost and average total cost for each section (cake and mango juice section). Exclude implicit costs.

b) Calculate James’ variable cost and average variable cost for each section. Exclude implicit costs.

c) Assume James sells each cake pack at AUD 5.00. Also, assume James sells each mango pack at AUD 2.00. Calculate James’ accounting profit and economic profit for the month of August.
 
 

James' August Business Summary Item Cake Section 1 cake shelf 1 oven 1 van used for distributing cakes Cake ingredients (Depending on demand. Assume this is the average expenditure per month) Cake packs (Number of packs bought depend on demand. Assume this is the average expenditure per month) Commercial cake mixer 2 Cake Preparation Workers: (wages depend on hours worked. Assume this is the average monthly wages per worker) Mango Juice Section 1 commercial cooler room and freezer room for mango juice Packaging Workers: for packaging of mango juice into bottles and into boxes (depending on demand but average per month) 2 Mango Juice Support Workers: (wages depend on hours worked. Assume this is the average monthly wages per worker) Mango juice preservatives (Depending on demand. Assume this is the average expenditure on preservatives per month) Cost (AUD) 50,000 10,000 50,000 20,000 40,000 10,000 4,000 48,000 40,000 15,000 8,000