Agatha Christie is evaluating two options.
The first option is to start an event planning business as a self-employed. Based on business plan, she computed the following annual estimates using very conservative assumptions:
- Total revenue = $250,000
- Purchases = $145,000
- Utility costs = $37,000
Agatha will operate the business by herself. She does not plan to hire any employees in the first year. She will operate the business from her a building that she owns. The building has been paid in full.
The second option is to work for an event planning company as an employee. Her annual salary would be $44,000. She could also rent her building for $24,000 per year. Using the concepts of accounting profit and economic profit, compare and contrast the two options.
Which option is the most profitable for Agatha Christie?