Question

n order to run the business Economan gave up a chance to earn $110,000 in a job at the local Space Agency. In addition, he estimates that instead of investing in his business he could have put money in the bank and earned $5,000 interest. A) What is Economan’s accounting profit?

Answer 1

Answer: $100,000

Explanation:

His accounting profit is his Revenue less his Explicit Costs. Explicit costs are those costs that have an actual payment/ physical cash attached to them.

Accounting Profit = Revenue - Explicit Costs

= 230,000 - ( 10,000 + 100,000 + 20,000)

= 230,000 - 130,000

= $100,000