Question

Danya plans to open an English course. Currently he earns Rp. 350 million per year teaching a language education institution and will have to give up this job if he opens a new English language course. If he chooses to open an English course, it will cost him rent and other operational costs of Rp. 2 billion per year.

a. How much does he need to generate positive accounting profit?
b. How much does he need to generate positive economic profit?

Answer 1

a) Ans: He needs to generate total revenue greater than $2 billion for positive accounting profit.

b) Ans: He needs to generates total revenue greater than $2.35 billion for positive economic profit.

Explanation:

Implicit costs =$350 million

Explicit costs = $2 billion

Accounting Profit = Total revenue - Explicit costs

Economic Profit = Accounting Profit - Implicit costs  

Or ,

Economic Profit  = Total revenue - Explicit costs - Implicit costs

answered by: anonymous