(Answered) Part iyou have begun a new business providing one-on-one

Accounting

PART I

You have begun a new business providing one-on-one tutoring. You have fixed costs of $1,800/month and a variable cost of $48. You can provide sessions at $66 each.

a.. Based on this information, calculate the breakeven level of daily output for the firm.

b.. After operating for a while, your variable cost rises to $50. What does this mean for the breakeven quantity of output?

PART II

a.. Explain why economic profit provides a better measure of profit than accounting profit.

b.. In measuring economic profit:

1) How do you deal with a one-time event?

2) How do you deal with money provided by relatives to get the business started?

3) How do you handle off-balance sheet expenses - that is, expenses that are incurred by the firm but are not measured as part of the firm's balance sheet?

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