27 August, 05:26

# 1. Megan used to work at the local pizzeria for \$15,000 per year but quit in order to start her own deli. To buy the necessary equipment, she withdrew \$20,000 from her inheritance (which paid 8 percent interest). Last year she paid \$25,000 for ingredients and \$500 per month rent but had revenue of \$50,000. She asked her dad the accountant and her mom the economist to calculate her costs for her.

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1. 27 August, 07:06
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To her dad who is an accountant, her cost will be \$31,000, but to her mum the economist, her cost will be \$47,600

Explanation:

Megan used to earn = \$15,000

This withdrawal would have earned her \$1,600 for one year at 8% interest

Expenses recorded = \$25,000 for ingredient

Rent = \$500 * 12 = \$6000 for 1 year

To her dad the accountant, what is recorded as cost or spent is what counts as cost, hence to the accountant;

Accountant (Dad) cost = Cost of ingredient + Cost of rent

= \$25,000 + \$6,000 = \$31,000

To her mum the economist, she put into consideration, the cost of the forgone alternative (\$15,000)

She also factors what she would have gain if she did not withdraw the money (the 8% interest) = \$1,600

Thus the Economist (Mum) cost = \$25,000 + \$6,000 + \$15,000 + \$1,600

= \$47,600