Managerial Accounting: E5-14A John Gassaway owns his own taxi

Managerial Accounting 
E5-14A Opportunity Costs 
John Gassaway owns his own taxi, for which he bought a $18,000 permit to operate two years ago. Mr. Gassaway earns $36,000 a year operating as an independent but has the opportunity to sell the taxi and permit for $73,000 and take a position as dispatcher for Sartino Taxi Co. The dispatcher position pays $31,000 a year for a 40-hour week. Driving his own taxi, Mr. Gassaway works approximately 55 hours per week. If he sells his business, he will invest the $73,000 and can earn a 10 percent return. 

Required: 
a. Determine the opportunity cost of owning and operating the independent business. 
b. Based solely on financial considerations, should Mr. Gassaway sell the taxi and accept the position as dispatcher? 
c. Discuss the qualitative as well as quantitative factors that Mr. Gassaway should consider.
Powered by