Maintains custom audio equipment for businesses

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At the beginning of the year, an audio engineer quit his job and gave up a salary of $175,000 per year in order to start his own business, Sound Devices, Inc. The new company builds, installs, and maintains custom audio equipment for businesses that require high-quality audio systems. A partial income statement for Sound Devices, Inc, is shown below: 2010 Revenues Revenue from sales of product and services $970,000 Operating costs and expenses Cost of products and services sold 355,000 Selling expenses 155,000 Administrative expenses 45,000 Total operating cost and expenses $555,000 Income from operations $415,000 Interest expense (bank loan) 45,000 Legal expenses to start business 28,000 Income taxes 165,000 Net income $177,000 To get started, the owner of Sound Devices spent $100,000 of his personal savings to pay for some of the capital equipment used in the business. In 2010, the owner of Sound Devices could have earned a 15 percent return by investing in stocks of other new businesses with risk levels similar to the risk level at Sound Devices , evaluate the owner's decision to leave his job to start Sound Devices.

Reference no: EM131196942

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