Final answer:
To find the operating costs excluding depreciation and amortization, subtract the explicit costs from the revenue. Operating costs are the expenses directly related to the day-to-day operations of a business. By excluding depreciation and amortization, you remove non-cash expenses from the calculation.
Step-by-step explanation:
To find the operating costs excluding depreciation and amortization, you need to subtract the explicit costs from the revenue. In this case, the explicit costs are the office rental and law clerk's salary totaling $85,000. Subtracting this from the revenue of $200,000 gives you an accounting profit of $115,000. Operating costs refer to the expenses directly related to the day-to-day operations of a business, such as rent, salaries, utilities, etc. By excluding depreciation and amortization, you remove the non-cash expenses from the calculation.