Question

Heidi quit her job as a chef making $40,000 per year to start her own restaurant. The first year, Heidi's restaurant earned $100,000 in revenue. Heidi pays $50,000 per year in wages to the waitresses and hostess and $20,000 per year to buy food. What is Heidi's profit as measured by an accountant for the year?

Answer 1

The accounting profit is $30,000.

Step-by-step explanation:

The implicit cost of running the restaurant is the opportunity cost of giving up a salary of $40,000 per year working as a chef.

The revenue earned from the restaurant is $100,000.

The explicit costs is

= $50,000 + $20,000

= $70,000

An accountant will consider only the accounting cost or explicit cost in the calculation of profits.

Accounting profit

= Total revenue - Explicit costs

= $100,000 - $70,000

= $30,000