Zhen left a job as an accountant making $80,000 a year to open his own business. Zhen now owns his own accounting firm and employs three book keepers to help manage his accounts. His total revenue this year was $525,000. Because he is well known for his estate planning and expertise, he is also paid $16,000 per year by a local news station to answer tax questions on their weekly Ask the Accountant segment. His explicit costs for payroll, insurance, taxes, mortgage, and utilities are $390,000. Zhen's accounting profit is

Question

Quizplus · Accepted Answer

Accounting profit is calculated by subtracting explicit costs from total revenue. Zhen's total revenue from his business and the news segment is $525,000 + $16,000 = $541,000. His explicit costs are $390,000. Therefore, his accounting profit is $541,000 - $390,000 = $151,000.

Zhen Left a Job as an Accountant Making $80,000 a Year