iain quit his job as an electrician where he earned $60,000 a year. he took $40,000 out of savings that…

iain quit his job as an electrician where he earned $60,000 a year. he took $40,000 out of savings that earned 5% interest annually ($2000 in interest per year) and invested it in a martial arts school. he has 110 students willing to pay $1000 a year apiece for martial arts classes at the school. the annual costs for rent, insurance, and equipment for the studio total $50,000. what is iains accounting profit or loss from this business venture?

iain quit his job as an electrician where he earned $60,000 a year. he took $40,000 out of savings that earned 5% interest annually ($2000 in interest per year) and invested it in a martial arts school. he has 110 students willing to pay $1000 a year apiece for martial arts classes at the school. the annual costs for rent, insurance, and equipment for the studio total $50,000. what is iains accounting profit or loss from this business venture?

Answer

Explanation:

Step1: Calculate total revenue

The number of students is 110 and each pays $1000 per year. So the total revenue $R$ is the product of the number of students and the price per student. $R = 110\times1000=110000$

Step2: Calculate total explicit cost

The annual costs for rent, insurance and equipment is $50000$. So the explicit cost $C_{e}=50000$

Step3: Calculate accounting profit

Accounting profit $\pi_{a}$ is total revenue minus explicit cost. $\pi_{a}=R - C_{e}=110000 - 50000 = 60000$

Answer:

$60000$