Nader G asked:
anya imports sweaters from Peru and sells them from her home. She collects $400,000 in revenue a year, and spends $200,000 on the sweaters and shipping costs, as well as $25,000 on accounting services and utilities. She used to make $100,000 per year working for an advertising agency. Now she works out of the basement of her house, for which she doesn’t have any other marketable use. She has no other expenses.
Tanya’s accounting profit is:
A) -25,000
B) 175,000
C) 200,000
D) 75,000
idk but B looks like a good answer
A freshmen it might be B.D
her profit from import business:
400,000 – (200,000 + 25,000)
=400,000 – 225,000
= $175,000
she would gain 100,000 if she worked (opportunity cost). so subtract it.
175,000 – 100,000 = $75,000
We want to find out how much she is actually making, to do this we take the revenue and subtract her expenditures.
$400,000 – $200,000 – $25,000 = $175,000
The answer would be B.
I think B is the correct answer. Remember, we are looking for the accounting profit. In accounting we don’t consider opportunity costs. If we were to look for the economic profit, make some intern calculations etc. we certainly would subtract the 100k, but not in accounting.