Scenario 13-11
Zach withdrew $400,000 out of his personal savings account and used it to start his new cookie business. The bank account pays 3 percent interest per year. During the first year of his business, Zach sold 6,000 boxes of cookies for $2.50 per box. Also during the first year, the cookie business made monetary outlays of $9,000. You may assume that there is no opportunity cost to Zach's time.
-Refer to Scenario 13-11.Zach's accounting profit for the year was
A) $-494,000.
B) $-6,000.
C) $6,000.
D) $12,000.

Question

Quizplus · Accepted Answer

Zach's revenue from selling cookies is calculated as follows:
6,000 boxes x $2.50 per box = $15,000

His total costs are calculated as follows:
$400,000 x 3% = $12,000 in interest expense
$9,000 in monetary outlays
Total costs = $12,000 + $9,000 = $21,000

Therefore, Zach's accounting profit for the year is:
$15,000 in revenue - $21,000 in costs = $6,000.

Scenario 13-11 Zach Withdrew $400,000 Out of His Personal Savings Account and Account