A carpenter quits his job at a furniture factory to open his own cabinetmaking business. In his first two years of operation, his sales average $100,000 per year and his operation costs for wood, workshop and tool rental, utilities, and miscellaneous expenses average $70,000 per year. Now his old job at the furniture factory is again available. What is the lowest wage at which he should decide to return to his old job? Why?

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Business

17 May, 01:07

A carpenter quits his job at a furniture factory to open his own cabinetmaking business. In his first two years of operation, his sales average $100,000 per year and his operation costs for wood, workshop and tool rental, utilities, and miscellaneous expenses average $70,000 per year. Now his old job at the furniture factory is again available. What is the lowest wage at which he should decide to return to his old job? Why?

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Guadalupe Donovan · Answer 1

Answer: $30000 or more

Explanation:

Calculation of profit made in the cabinet making business

Profit = Sales - Operation costs

=$100,000-$70,000

=$30000

From the calculation it can be seen that he earns a profit of $30,000 per year. As there is a job opening in furniture factory he can take up the job only if the lowest wage is at least $30,000 or more. This is for the monetary benefits that he receives through his salary. If the wages offered is less than his annual profits then he can continue with his business.