Question

Bonzo is in business for himself making and selling Easter baskets. His daily cost for wicker is $100 and his daily revenue is $120. Bonzo quit his job at the Basket Weaving factory where he earned $15 a day, to enter the Easter basket business. Given this information, we know that his accounting profit

A) Is $20
B) Is $5
C) Is $120
D) Is $15

Answer 1

Bonzo's accounting profit from his Easter basket business is simply his revenue minus his costs, which equates to $20 per day. The correct answer does not include opportunity costs such as foregone salary from his previous job.

Step-by-step explanation:

Given Bonzo's business of making and selling Easter baskets, his daily cost for wicker is $100, and his daily revenue is $120. To calculate the accounting profit, we must subtract the cost from the revenue. Therefore, Bonzo's accounting profit would be:

Accounting Profit = Revenue - Cost
Accounting Profit = $120 - $100
Accounting Profit = $20

However, it is important to note that Bonzo also quit his job at the Basket Weaving factory where he earned an additional $15 a day. If we consider his opportunity cost, which in this case is the forgone salary from the factory, the economic profit would adjust accordingly. But since the question specifically asks for the accounting profit, which does not factor in opportunity costs, the correct answer is A) $20.