The Economics of Global Business Challenges

Management 1
THE ECONOMICS OF GLOBAL BUSINESS CHALLENGES
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Management 2
Task 1
I will use the normal profit formula (accumulated revenue – (Explicit expense + Implicit Ex-
pense )). Karen business will be in a point of normal profit when its economic profit is equiv-
alent to 0 that is the reason why a normal profit is also termed as ‘zero economic profit’. A
profit that is normal takes place at the instant where the available resources to Karen business
are being effectively utilized and can be consolidated for a better use at another place.
A procedure to establish whether Karen business is in a point of normal profit can be denoted
in the following manner:
Accumulated Revenue -(Explicit Expense +Implicit Expenses) = 0
Ten brand new coffee machines $ 100,000
Yearly salary $ 90,000
Coffee beans $ 125,000
Other expenditure (Electricity, cleaning, etc.). $ 20,000
Resale of value of the ten coffee machines (-) $ 50,000
Cost of cups $ 65,000
Total cost of coffee sold 500,000x $ 4 x 365= $ 730,000,000
Accumulated revenue=$ 100,000+$ 200,000=300,000,
Explicit expense + Implicit expense =$ 90,000+$ 125,000 + $ 20,000+$ 50,000+$ 65,000= $
$ 350,000
$ 730,000,000-$ 350,000=$ 729,650,000
Task 2
The profit figure for Karen’s coffee shop that the accountant arrived at
was obtained through the accumulated revenues subtract the explicit costs, including depreci-
ation.
Profit figure for Karen’s Coffee shop
Revenue $ 100,000
Cost of coffee sold $ 730,000,000
Gross profit $ 730,100,000
Expenses
Yearly salary $ 90,000