Question

Harvey quit his job at the University of Toronto where he earned $45,000 a year. He figures his entrepreneurial talent, or forgone entrepreneurial income, to be $5000 a year. He cashed in $100,000 in bonds that earned 10% interest annually to buy a software company, Extreme Gaming. In the first year, the firm sold 11,000 units of software at $75 per unit. Of the $75 per unit, $55 goes for the costs of production, packaging, marketing, employee wages and benefits, and rent on a building.

What is the accounting profit in the first year?

Answer 1

First work out how much he was earning before he quit his job

then work out how much the company he brought made

then take away the expenses of the company

then take away the amount he earnt before he quit his job to work out how much profit he made by quitting his job or if it was a bad idea.

Answer 2

he was earning $ 50000 before he quit his job?

Answer 3

plus 10% of 100,000 from the interest of his saving bonds

Answer 4

why?

Answer 5

is it going to be explicit cost?

Answer 6

What is explicit cost?

Answer 7

including wages, rent,

Answer 8

I don't know. i figured his original earnings would be 45000 + 5000 + 10000

Answer 9

so the accounting profit will be 160000 ?

Answer 10

Not sure. i don't do accounting. i thought this was a simple maths question. sorry if i have confused you

Answer 11

ok

Answer 12

https://www.google.co.in/url?sa=t&rct=j&q=&esrc=s&source=web&cd=5&cad=rja&ved=0CEwQFjAE&url=http%3A%2F%2Fwww.mayfieldschools.org%2Fuserfiles%2F1351%2FClasses%2F26295%2FMicro%2520Chapter%252020%2520Practice%2520Problems%25201%2520Key-0.doc&ei=a5YyUZvkBITrrQf_gYHoDA&usg=AFQjCNFK-shm2Hax3REtMkdZHyCxZArNFg&sig2=836ftZlYgBtth67fepQ3cg&bvm=bv.43148975,d.bmk

Answer 13

open the above link alfira it will help you, this contains ur question