In 2010 Serena Villiams, the legendary tennis player from California, decided to leave the professional world of tennis to open Serena Fashions, her own clothes store, in San Jose. By locating Serena Fashions in Silicon Valley, Serena hoped to attract customers from a large metropolitan market. A partial income statement for Serena Fashions follows:

SERENA FASHIONS INCOME STATEMENT

DECEMBER 31, 2010

Revenues

Revenue from sales of goods and services$5,100,000

Operating costs and expenses

Costs of products and services sold$1,820,000

Selling expenses$768,000

Administrative expenses$2,200,000

Total Operating Costs & Expenses$4,788,000

Operating Income from operations$312,000

Interest expense (bank loan)$14,000

Non-recurring expenses to start business$8,000

Income taxes$116,000

Net income$174,000

Serena's annual earnings and benefits as a professional tennis player was $100,000. To get Serena Fashions opened, Serena used $75,000 of her personal savings, which was earning a guaranteed 8 percent annual rate of return.

Serena opened her store in a building she owned in San Jose. Prior to opening her store, the building was rented for $36,000 per year. Serena liquidated a $25,000 CD that was earning 1.5% year and put it in her personal savings account as "emergency money." The city of San Jose gave her $25,000 to improve her store, and merchandizing racks worth $9,000.

In 2010, the opportunity cost of Serena's savings account is $______________.

Answer 1

Choose...

$282,000

$142,000

$375

$4,926,000

$36,000

$5,068,000 and $5,068,000

$4,788,000

$5,100,000 and $4,960,000

$6,000

$16,000

$140,000

$4,788,000 and $4,788,000

The total opportunity cost of resources used by Serena Fashions in 2010 is $_______________. The total economic cost in 2010 is $_______________.

Answer 2

Choose...

$282,000

$142,000

$375

$4,926,000

$36,000

$5,068,000 and $5,068,000

$4,788,000

$5,100,000 and $4,960,000

$6,000

$16,000

$140,000

$4,788,000 and $4,788,000

The total implicit cost of using owner-supplied resources in 2010 is $____________.

Answer 3

Choose...

$282,000

$142,000

$375

$4,926,000

$36,000

$5,068,000 and $5,068,000

$4,788,000

$5,100,000 and $4,960,000

$6,000

$16,000

$140,000

$4,788,000 and $4,788,000

The accounting profit for Serena Fashions in 2010 is $_______________.

Answer 4

Choose...

$282,000

$142,000

$375

$4,926,000

$36,000

$5,068,000 and $5,068,000

$4,788,000

$5,100,000 and $4,960,000

$6,000

$16,000

$140,000

$4,788,000 and $4,788,000

In 2010, Serena Fashions incurs $_______________ of total explicit costs for using market-supplied resources.