Megan used to work at the local pizzeria for $15,000 per year but quit to start her own deli. To buy the necessary equipment, she withdrew $20,000 from her inheritance (which paid 8 percent interest). Last year she paid $25,000 for ingredients and $500 per month rent but had revenue of $50,000. She asked her dad the accountant and her mom the economist to calculate her profit for her.
A) Dad says she lost $11,000 and Mom says she lost $26,000.
B) Dad says her profit is $31,000 and Mom says her profit is $16,600.
C) Dad says her profit is $9,000 and Mom says she lost $6,000.
D) Dad says her profit is $9,000 and Mom says her profit is $2,400.

Question

Quizplus · Accepted Answer

Dad's calculation: Revenue - Expenses = Profit$50,000 - ($25,000 + $6,000) = $19,000Profit - Interest on withdrawn inheritance = Net Profit$19,000 - ($20,000 * 0.08) = $9,000Mom's calculation: Revenue - Explicit Costs - Implicit Costs = Profit$50,000 - ($25,000 + $6,000) - ($20,000 * 0.08) = $2,400

Megan Used to Work at the Local Pizzeria for $15,000