ECON802 - Teena’s Business Venture Case Study & Business Report Writing, Economic & Accounting Profit, Dirham Value - Accounting Assignment Help

Assignment Task -                 
 

Attention to detail 
It is imperative that you consider each and every detail provided in the following statement. You must address the tasks with the maximum attention and take this assignment very seriously. Untidy Business Reports imply a lack of interest in your assignment. You must identify each task in your Business Report. It is a serious mistake not to do so. Failure to identify the tasks or follow the other requirements explicit in the report format will result in a reduction of your total mark, depending on the number of tasks not identified or omissions incurred. 

Identifying Tasks 
You must identify each Task in your Business Report. This means that you have to state (like a sub-heading) each Task immediately before the paragraph/s developing it. For example, “Task To develop this task, I will use Failure to identify the tasks or follow the other requirements explicit in the Compulsory Format will result in a reduction of your total mark, depending on the number of tasks not identified or omissions incurred.

1.Statement of the Case Study 
Teena’s Business Venture 
Teena is an art teacher but a year ago, she decided to take a year’s leave without pay to start a new business. She became the owner of a coffee shop in Al Barsha. She is selling coffee and sandwiches. She has leased two coffee machines at a  cost of AED 1600 per month. The monthly rent for the café is AED 5000. Her salary as a teacher was AED 8000 per month. Teena hired two university students to help her, paying each student a monthly salary of AED 3000. Her monthly expenditure on coffee beans and other ingredients is AED 4000 and AED1000 on other expenditures (electricity, cleaning, etc.). 

Teena faces the following demand curves for coffee and sandwiches.

The demand curve for coffee per 
week Qd = 200 – 2 x P 
The demand curve for sandwiches  
per week Qd = 400 – 12

Teena
Teena has no knowledge of elementary microeconomics. She does not know how to calculate the elasticity of demand. She is currently charging a price of AED 20.00 per unit for both coffee and sandwiches and is thinking about increasing the price of both to AED 25.00 per unit. 

A friend of Teena’s was an undergraduate business student who told her that for her business to be worthwhile she should be making at least a normal profit. Teena was curious about the profit she made last month and consulted an accountant and an economist. She provided all the above- mentioned information to the accountant and the economist. To her surprise, they come up with different values for the total profit before tax. This was very disturbing and confusing for Teena and she decided to consult an ECON 802 student to organize her thinking. 

Task 1 

Complete the table below 

Table 1 

Q-What is the dirham value of the monthly Economic profit and Accounting profit in this case study? (Fill in the blanks in Table 2). (Computations to arrive at the required  result must be shown in the Appendix) Why are the two values different? (For the revenue, multiply the weekly quantity x 4 to get the monthly quantity). 
 

Table 2 

Task 2 
Explain to Teena the meaning of “normal profit”. Does she need to exit the market if she is earning a normal profit?
Task 3 
Calculate the elasticity of demand for both coffee and sandwiches when the price changes from AED20 to AED25. Fill in the blanks of Table 2.
Table 3 

Task 4 
Explain the concept of price elasticity of demand to Teena and advise her about her pricing strategy for both coffee and sandwiches. Do you think it is a good idea for her to increase the price of both items from AED 20 to AED 25? Justify your answer. 
 

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