Question

Until recently you worked as an accountant earning $30,000 annually. Then you inherited a piece of commercial real estate bringing in $12,000 rent annually. You decided to leave your job and operate a video rental store in the office space you inherited. At the end of the first year, your books showed total revenues of $60,000 and total costs of $30,000 for video purchases, utilities, taxes, and supplies. What is the total cost of operating the video store?

A. $60,000
B. $42,000
C. $30,000
D. none of the above

Answer 1

Answer: Option (c) is correct.

Step-by-step explanation:

Correct option : $30000

Given that,

Earned as an accountant = $30000

Rent from real estate = $12,000

Video rental store showed total revenue = $60,000

Total costs = $30,000

Opportunity cost of previous job = $30000

Net revenue = Total revenue - Earned as an accountant

= 60000 - 30000

= $30,000

Therefore, our previous salary is same as this net revenue.

So, the only cost of operating the video store is $30000.