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Business Objectives

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Question 13

An entrepreneur leaves her salaried position earning £45,000 per year to start a boutique bakery. In her first year of trading, the bakery's financial records show:

  • Total revenue of £180,000
  • Total explicit costs (rent, ingredients, employee wages, utilities) of £120,000
  • Personal savings of £20,000 used as start-up capital, which previously earned 5% interest per annum in a savings account

Calculate the entrepreneur's accounting profit and economic profit for her first year of trading.

Accounting Profit = £60,000£60,000£60,000; Economic Profit = £15,000£15,000£15,000

Accounting Profit = £60,000£60,000£60,000; Economic Profit = £14,000£14,000£14,000

Accounting Profit = £14,000£14,000£14,000; Economic Profit = £60,000£60,000£60,000

Accounting Profit = £180,000£180,000£180,000; Economic Profit = £134,000£134,000£134,000

Business Objectives Questions

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