Question

1. In 2020 Gurpreet Sandhu, the legendary athlete from India, decided to leave his
job as goalkeeper and come with his own brand of Sporting goods(Niche). He
hoped to attract customers from national and International markets. A partial
Income statement for Niche: 2020
Revenue from sales of goods and services Rs.210,000
Operating costs and expenses
Costs of products and services sold Rs.82,000
Selling expenses Rs.6,000
Administrative expenses Rs. 12,000
Total Operating Costs & Expenses Rs.100,000
Income from operations Rs.110,000
Interest expense (bank loan) Rs.14,000
Non-recurring expenses to start business Rs.8,000
Income taxes Rs.16,000
Net Income Rs.72,000
Gurpreet Sandhu goalkeeping paid Rs.45,000 of annual salary and benefits.
To get the sporting goods store opened, he used Rs.50,000 of his personal
savings, which was earning a guaranteed 12 percent annual rate of return. He
opened his store in a building that he owned In Terre Haute. Prior to opening his
store, the building was rented for Rs.24,000 per year.
a. In 2020, Niche Incurs Rs.
of total explicit costs for using market-
supplied resources.
b. In 2020, the opportunity cost of his equity capital is Rs.
c. The total implicit cost of using owner-supplied resources in 2020 Is
Rs.
d. The total opportunity cost of resources used by Niche in 2020 is
Rs.
The total economic cost in 2020 is Rs.
e. The accounting profit for Niche in 2020 Is Rs.
f. Based on his profit in 2020, did Gurpreet increase his wealth by quitting his job
and opening Niche ? Explain your answer carefully.
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Answer 1

Answer:

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