Question

Christine used $5,000 from her personal savings account to buy pottery tools for her business. The savings account paid 1% annual interest. Christine could earn $6,000 per year as a tax preparer. What is the annual accounting profit of her cookie jar business?

Answer 1

Complete question:

Christine is an artist who creates custom cookie jars. Her annual revenue from selling the cookie jars is $90,000. The annual explicit costs of the materials used to make the cookie jars are $54,000.

Christine used $5,000 from her personal savings account to buy pottery tools for her business. The savings account paid 1% annual interest. Christine could earn $6,000 per year as a tax preparer. What is the annual accounting profit of her cookie jar business?

Answer: $36,000

Explanation:

Amount from personal saving balance = $5000

Annual interest rate on saving = 1%

Annual revenue fro selling cookie jar = $90,000

Explicit cost of cookie jar materials = $54,000

Amount to be earned as a tax preparer = $6000

Accounting profit = Total revenue - Explicit cost

Accounting profit = $90,000 - $54,000

Accounting profit = $36,000