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Oliver is a hairstylist and is going to start his own salon business. Before he opens...

  1. Oliver is a hairstylist and is going to start his own salon business. Before he opens the Salon, he must make sure that the business is profitable. Oliver will employ three hairstylists. He believes that every hairstylist, including himself, will serve 5 customers per day and earn $70/customer. The salon will open for 25 days per month. Oliver will pay each hairstylist $5000 per month. The remainder of the total cost such as a space rental, utility, and advertisement will cost $8000/month. If Oliver does not run his own business, he will alternatively work as a hairstylist for a salon and earn $7000/month.

What is the accounting profit of Oliver’s salon business? Is the accounting profit equal to the business’ economic profit? If not, please show what the economic profit is. If you were Oliver, would you open the business and why?

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Answer i Accounting profit 9 workings 3x5x70x25 Income 26250 less expense salary rent, utility, etc 5000 X 3 (15000) (8000) P

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