19 **Case Study: Gertrude's Consulting Firm**Gertrude left her $40,000-per-year job to launch her consulting business. She invested her $50,000 savings, which previously earned $2,000 in annual interest, into her firm.**First Year Financial Overview:**- **Total Revenues:** $208,000- **Explicit Costs:** $108,000**Question:**Calculate Gertrude’s accounting profits from her consulting firm.**Options:**- a) $50,000- b) $30,000- c) $100,000- d) $48,000**Analysis:**To find the accounting profit, subtract the total explicit costs from the total revenues.

Implicit cost is the foregone income that could have been earned if resources were invested elsewhere. These include foregone salary, interest of rent.Accounting profit does not consider implicit cost. Accounting profit = revenue - explicit cost = 208000 - 108000 = 100000 Answer : $100000

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Gertrude quit her $40,000- per- year job to start her own own consulting firm. She withdrew her savings of $50,000 which was earning her an interest of $2000 in the bank and invested in her own consulting firm. At the end of her first year of operation, her total revenues were $208,000. Her total explicit costs were $108,000. How much are her accounting profits from her own consulting firm? O $50,000 O $30,000 O $100,000 O $48,000

Gertrude quit her $40,000- per- year job to start her own own consulting firm. She withdrew her savings of $50,000 which was earning her an interest of $2000 in the bank and invested in her own consulting firm. At the end of her first year of operation, her total revenues were $208,000. Her total explicit costs were $108,000. How much are her accounting profits from her own consulting firm? O $50,000 O $30,000 O $100,000 O $48,000

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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