Question

Susan quit her job as a teacher, which paid her $36,000 per year, in order to start her own catering business. she spent $12,000 of her savings, which had been earning 10 percent interest per year, on equipment for her business. she also borrowed $12,000 from her bank at 10 percent interest, which she also spent on equipment. for the past several months she has spent $1,000 per month on ingredients and other variable costs. also for the past several months she has taken in $3,500 in monthly revenue.

Answer 1

Susan's financial situation considering her new catering business includes the assessment of explicit costs, such as interest and variable expenses, and implicit costs, like the salary she forgo by leaving her job. By reviewing these costs against her revenue, she can evaluate her true economic profit from the business.

Step-by-step explanation:

The question regarding Susan quitting her job to start her own catering business involves calculating both explicit and implicit costs to determine her true economic profit. Susan has used a combination of her savings and a bank loan to invest in her new venture. In addition, her variable costs and monthly revenue need to be considered to evaluate the financial performance of her business.

The explicit costs include the interest foregone on her savings, the interest on the bank loan, and her monthly variable costs of operating the business. The implicit cost is the annual salary she gave up by leaving her teaching job. By calculating and subtracting both types of costs from her monthly revenue, Susan can determine her actual earnings from the catering business. If the total exceeds her former salary, she may be financially better off; if not, she may incur an opportunity cost in terms of income lost.

Answer 2

All that money she borrowed 3500 ain't to much