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Zach took $400,000 out of the bank and used it to start his new cookie business. The bank account pays 3 percent interest per year. During the first year of his business, Zach sold 6,000 boxes of cookies for $2.50 per box. Also, during the first year, the cookie business incurred costs that required outlays of money amounting to $9,000. Zach's accounting profit for the year was:_______.

Assume that he can sell the rights to his business for $400,000 at any time.
a) -$494,000, $3,000
b) -$494,000, -$6,000
c) $6,000, $3,000
d) $6,000, -$6,000

User Smitrp
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1 Answer

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Answer:

d) $6,000, -$6,000

Step-by-step explanation:

Accounting profit = total revenue - explicit costs

=6000 x 2.5-9000 = $6000

Economic profit = accounting profit - interest on capital invested

=6000 - 400000 x 0.03

=$-6000

User SivaRajini
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