Reference no: EM132505319
John was a high school teacher earning $ 80,000 per year. He quit his job to start his own business in pizza catering. In order to learn how to run the pizza catering business, John enrolled in a TAFE to acquire catering skills.
John's course was for 3 months. John had to pay $2,000 as tuition for the 3 months.
After the training, John withdrew $110,000 from his savings account. He had been earning 5 percent interest per year for this account. He also borrowed $50,000.00 from his friend whom he pays 6 percent interest per year.
John's first year of business can be summarised as follows:
Item Amount $
Revenue 250,000
Labour cost 120,000
Pizza ingredients 50,000
Equipment 10,000
Calculate John's accounting profit and economic profit?
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