Scenario: Accounting and Economic Profit

Rather than put the $100,000 that his grandmother left him in a mutual fund that earns 5% each year, Tommy Wang quit his job that paid $60,000 per year and started Wang's Wicker Furniture Store. He rented a showroom for $20,000 for the year, purchased $60,000 in wicker furniture, and incurred costs of $40,000 for sales help and advertising. Instead of using the capital for his own business, he could rent it to a rival firm and earn $5,000 a year. In his first year, his revenue was $150,000.

Examine the scenario Accounting and Economic Profit. The accounting profit of Wang's Wicker Furniture Store is:

$200,000.

$60,000.

$30,000.

$0.