Please follow the directions as stated.
Economic Profit Problem 2 Kristen Larson just graduated at the top of her massage class from the Aveda Institute in Des Moines, IA. Her plan is to move to Sioux City, IA for at least 5 years so she can spend time with her elderly grandparents and gain experience before branching out into a top salon in a large city. Upon graduation, Kristen received a job offer from Belle Touch, an Aveda Salon and Spa in Sioux City, for $70,000 dollars (including salary and insurance). Kristen would have to work Tuesday through Saturday from 9am-6pm for 50 weeks out of the year. The salon would pay for all of Kristen's supplies and equipment but she would need to put 15% of her tips each day into tipshare for the front desk and clean-up employees. Tips are estimated at $25,000 per year Kristen also is considering using her $8,500 savings to be her own boss so she can work less and more flexible hours. For $120 per week (S6,240 per year), she can rent a room at Salon Volume but she would have to provide her own supplies, equipment, and insurance. She plans to schedule massages for 25 hours per week at an average rate of $65 per hour and spend 5 hours per week on other business duties (scheduling, bookkeeping cleaning, purchasing, etc.) for 50 weeks of the year. Tips average 20% of the cost of services and the cancellation rate is 7%. Kristen's estimated costs are detailed below Massage Table: $1,000 (one time expense) Lotions, Oils, Linens, Candles, and Other Supplies: $200 per month Remaining on her Parent's Health Insurance (she is only 20): S150 per month Advertising: $40 per month Liability Insurance: S55 per month If Kristen takes the job at Belle Touche, she will be able to earn 4% interest, on the money in her savings account. If she decides to work for herself, she will have 10 more hours of leisure each week which she values at $15 per hour Calculate Kristen's annual economic profit for each alternative using the template provided. (Please note, each cell may not have an entry for both options.) All relevant values are gathered below Belle Touch $70,000 $25,000 % of Tips Needed to Put into Tipshare for the Front Desk and Clean-up Employees 15% Savings Amount Interest on Savings Account $8,500 Charges for One Hour of Massage Hours of Massage per week Working Weeks in a year Rental Expenses per vear Cost of a Massage Table Lotions, Oils, Linens, Candles, and Other Supplies Expenses per month Remaining on her Parent's Health Insurance Expenses per month Advertising Expenses per month Liabilty Insurance Expenses per month Tips as a Percentage of the Cost of Services Cancellation Rate Value of Leisure per hour Additional Leisure Hours per wee!k Number of months per year Salon Volume $65 25 50 $6,240 $1,000 $200 $150 $40 $55 20% $15 10 12 Belle Touch Salon Volume Salary Total Revenue Kristen's Tips Interest Received Value of Leisure Time Total Economic Benefit One-Time Expenses Rental Expenses Total Monthly Expenses Cancellation Expenses Total Economic Cost Total Economic Profit Which option should she choose based on her economic profit? should be chosen based on the economic profit
