Justin Brimer owns his own taxi, for which he bought a $23,000 permit to operate

Question

Justin Brimer owns his own taxi, for which he bought a $23,000 permit to operate two years ago. Mr. Brimer earns $34,000 a year operating as an independent but has the opportunity to sell the taxi and permit for $92,000 and take a position as dispatcher for Carter Taxi Co. The dispatcher position pays $33,000 a year for a 31-hour week. Driving his own taxi, Mr. Brimer works approximately 46 hours per week. If he sells his business, he will invest the $92,000 and can earn a 10 percent return. Required a. Determine the opportunity cost of owning and operating the independent business. pportunity cost b-1. Calculate the earnings of Justin Brimer operating as an independent. Operating as an independent b-2. Calculate the earnings of Justin Brimer working as a dispatcher. Working as a dispatcher b-3. Based solely on financial considerations, should Mr. Brimer sell the taxi and accept the position as dispatcher? O Yes O No

Explanation / Answer

Answer a. Oppourtunity Cost of Owing & Operating the Independent Business Oppourtunity Cost of owing the Taxi & Permit                          92,000 Oppourtunity Cost of driving the Taxi                          33,000 Oppourtunity Cost of Interest on Funds - $92,000 X 10%                             9,200 Total Oppourtunity Costs                        134,200 Answer b-1. Earrings Working as Independent: Business Income                          34,000 Answer b-2. Earrings Working as Dispatcher: Salary Income                          33,000 Interest on Funds - $92,000 X 10%                             9,200 Total Earnings                          42,200 Answer b-3. Yes, Bimmer should sell the Taxi and accept the position as Dispatcher.

Related Questions

Navigate

• Browse (All)
• Browse J
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.