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
b. How much does he need to generate positive economic profit?
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.
Implicit costs =$350 million
Explicit costs = $2 billion
Accounting Profit = Total revenue - Explicit costs
Economic Profit = Accounting Profit - Implicit costs
Economic Profit = Total revenue - Explicit costs - Implicit costs
Get Answers For Free
Most questions answered within 1 hours.