Step 1
Work It Out
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You must read each slide, and complete any questions on the slide, in sequence.
Hiro owns and operates a small business that provides economic consulting services. During the year he spends $57,000 on travel to clients and other expenses. In addition, he owns a computer that he uses for business. If he didn’t use the computer, he could sell it and earn yearly interest of $100 on the money created through this sale. Hiro’s total revenue for the year is $100,000. Instead of working as a consultant for the year, he could teach economics at a small local college and make a salary of $50,000.
What is Hiro's accounting profit?
Remember that accounting profit is only concerned about revenue and monetary costs. For Hiro, operating his business providing economic consulting services generates an economic profit of $43,000 ($100,000 - $57,000). For review see section “Accounting Profit versus Economic Profit.”
What is Hiro’s accounting profit?
Remember that accounting profit is only concerned about revenue and monetary costs. For Hiro, operating his business providing economic consulting services generates an economic profit of $43,000 ($100,000 - $57,000). For review see section “Accounting Profit versus Economic Profit.”
What is Hiro’s accounting profit?