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Questions and Answers
What was the total revenue from sales at Brady Advantage in 2013?
What was the total revenue from sales at Brady Advantage in 2013?
- $72,000
- $210,000 (correct)
- $100,000
- $14,000
What were the total operating costs and expenses incurred by Brady Advantage in 2013?
What were the total operating costs and expenses incurred by Brady Advantage in 2013?
- $110,000 (correct)
- $72,000
- $210,000
- $8,000
What was the net income of Brady Advantage in 2013?
What was the net income of Brady Advantage in 2013?
- $110,000
- $16,000
- $50,000
- $72,000 (correct)
What is the opportunity cost of Terry Brady's personal savings that he used to fund the store?
What is the opportunity cost of Terry Brady's personal savings that he used to fund the store?
What is the total economic cost incurred by Brady Advantage in 2013 if the accounting profit is $72,000?
What is the total economic cost incurred by Brady Advantage in 2013 if the accounting profit is $72,000?
Which amount represents the income from operations for Brady Advantage?
Which amount represents the income from operations for Brady Advantage?
What were the selling expenses incurred by Brady Advantage in 2013?
What were the selling expenses incurred by Brady Advantage in 2013?
Did Terry Brady increase his wealth by quitting his job based on the economic profit calculation?
Did Terry Brady increase his wealth by quitting his job based on the economic profit calculation?
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Study Notes
Brady Advantage
- Terry Brady started Brady Advantage in 2013, a sporting goods store in Terre Haute, Indiana
- Brady Advantage is strategically located between St. Louis and Indianapolis
- Brady Advantage generated $210,000 in revenue and $100,000 in operating expenses resulting in a $110,000 operating income
- Brady Advantage incurred $14,000 in interest on a bank loan, $8,000 in business start-up costs, and $16,000 in income taxes
- Brady Advantage generated $72,000 in net income in 2013
- Before starting Brady Advantage, Terry Brady earned $45,000 per year as a football coach
- $50,000 of Brady's personal savings were used to fund Brady Advantage which was earning 2% interest annually
Costs & Profit
- Explicit costs are expenses incurred by a company and paid to outside suppliers/vendors
- Implicit costs are the opportunity costs associated with using owner-supplied resources
- Opportunity cost is what is given up when making a decision
- Economic cost is the sum of explicit and implicit costs
- Accounting profit only accounts for explicit costs
- Economic profit accounts for both explicit and implicit costs.
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