Question

Ellie has been working for an engineering firm and earning an annual salary of $80,000. She decides to open her own engineering business. Her annual expenses will include $15,000 for office rent, $3,000 for equipment rental, $1,000 for supplies, $1,200 for utilities, and a $35,000 salary for a secretary/bookkeeper. Ellie will cover her start-up expenses by cashing in a $20,000 certificate of deposit on which she was earning annual interest of $500.

According to Ellie’s accountant, which of the following revenue totals will yield her business $50,000 in profits?

a. $55,200
b. $105,200
c. $132,500
d. $185,700

Answer 1

Option- A

• An amount of about $55,200 will be the revenue totals that will be yield her business $50,000 in profits.

Step-by-step explanation:

• Ellie has been working for an engineering firm and earning an annual salary of $80,000. She decides to open her own engineering business. Her annual expenses will include $15,000 for office rent, $3,000 for equipment rental, $1,000 for supplies, $1,200 for utilities, and a $35,000 salary for a secretary/bookkeeper. Ellie will cover her start-up expenses by cashing in a $20,000 certificate of deposit on which she was earning annual interest of $500.So, an amount of about $55,200 will be the revenue totals that will be yield her business $50,000 in profits.

Answer 2

a. $55,200

(Accounting cost = Explicit cost = Direct expenses = 15,000 + 3,000 + 1,000 + 1,200 + 35,000 = 55,200)