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Calculate jessie accounting profit and economic profit

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Reference no: EM132415480

Jessie, a pharmacist, is planning on opening her own pharmacy. Jessie Pharmacy is expected to generate yearly revenue of $500,000. Jessie will run the pharmacy herself on full-time basis.

Jessie's alternative employment options are as follows:

  • Continue to work as a senior medical representative for $50,000 per year.
  • Accepts a research position in another company for $70,000 per year.

Jessie expects to spend $350,000 per year on purchasing drugs and cosmetics for resale to her customers. She will also need to hire three employees: an assistant, an accountant and a custodian, for whom the total salaries to be paid are expected to be $48,000 per year. Jessie owns the building in which her pharmacy is supposed to be; however, she could rent the pharmacy-store space out for $42,000 per year.

Calculate Jessie's accounting profit and economic profit. In your opinion, should Jessie proceed with opening her own pharmacy? Justify your answer.

Reference no: EM132415480

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