23 January, 04:38

# Chad runs a coffee shop that has annual revenues of \$300,000, supply costs of \$60,000, and employee salaries of \$60,000. He has the option of renting out the coffee shop for \$80,000 per year, and he has three outside offers from competitors to work as a senior barista at Starbucks (for an annual salary of \$30,000), at Simon's coffee house (for an annual salary of \$40,000), and at Pete's coffee shop (for an annual salary of \$60,000). He can only hold one job at a time. What should Chad do? A. He should continue to run his coffee shop. B. He should rent out his coffee shop and take the job at Pete's. C. He should rent out his coffee shop and take the job at Starbucks. D. He should rent out his coffee shop and take the job at Simon's.

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1. 23 January, 06:31
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The correct answer is option A.

Explanation:

Chad runs a coffee shop that has annual revenues of \$300,000, supply costs of \$60,000, and employee salaries of \$60,000.

He can rent out the coffee shop for \$80,000 per year.

He has three outside offers from competitors to work as a senior barista at Starbucks for an annual salary of \$30,000, at Simon's coffee house for an annual salary of \$40,000, and at Pete's coffee shop for an annual salary of \$60,000.

The profit from coffee shop

= Total revenue - Total cost

= \$300,000 - (\$60,000 + \$60,000)

= \$300,000 - \$120,000

= \$180,000

The income if he rents coffee shop and starts working as Barista at highest paying coffee shop

= \$80,000 + \$60,000

= \$140,000

Since, the profit is higher in running the coffee shop, Chad should continue to run his coffee shop.