Question

Colton earns $35 per lawn he mows. In kne day he mows four lawns and he works five days a week for 20 weeks a year. His expenses for his lawn care business are $12 for gas in his mower per day; $75 for gas in his truck every two weeks; and $8 for gas in the trimmer and blower every week. Colton wants to buy a new truck this fall. The truck is a used truck thay his father's friend is selling for $5,200. One of Colton's friends wants to buy his truck for $1,500. Colton's buddies are planning a fishing trio during the lawn season that will cost Colton$250 for his expenses to go along. However, he will also have to get someone to mow his lawns and take care of his customers. Colton believes he can hire Jim for $120 per day and let Jim use his equipment. 1. What advice can you give to Colton to help him with the financial decisions he needs to make? 2. Hiw do opportunity costs factor into his decision to go on the fishing trip? What if he decides to byy the new truck?

Answer 1

1) Consider that he makes $1189 every two weeks engaged with work

2) An estimate of the opportunity cost of going on the fishing trip is $1450 in two weeks

3). If he decides to buy the truck, he has to work for about 7 weeks before going on the fishing trip

Explanation:

From the given data

Total revenue from lawn mowing per year = 35 × 4× 5×20 = $1400

Similarly total operating costs = $2110

Total profit per annum = $11890

However total revenue per every 2 weeks = $1189

To buy the truck, sell his and go on the fishing trip it will cost = 5200-1500+250 =$3950 hence he has to work for about 6.64 or approximately 7 weeks before going on the fishing trip

2) Opportunity cost will factor in the cost of having someone work for him while away

The cost is = $250 + $120/day

Hence in two weeks it will cost him $1450

3) He has to work for about 7 weeks to be able to afford the truck