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Scenario: Accounting and Economic Profit
Rather than put the $100 000 that his grandmother left him in a mutual fund that earns 5% each year,Tommy Wang quit his job,which paid $60 000 per year,and started Wang's Wicker Furniture Store.He rented a showroom for $20 000 for the year,purchased $60 000 in wicker furniture,and incurred costs of $40 000 for sales help and advertising.In his first year,his revenue was $150 000.
-(Scenario: Accounting and Economic Profit)Use Scenario: Accounting and Economic Profit.The accounting profit of Wang's Wicker Furniture Store is:

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Quizplus · Accepted Answer

Accounting profit is calculated as total revenue minus explicit costs. Tommy's explicit costs are $20,000 (rent) + $60,000 (furniture) + $40,000 (sales help and advertising) = $120,000. His revenue is $150,000. Therefore, the accounting profit is $150,000 - $120,000 = $30,000.

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