Harvey Quit His Job at State University, Where He Earned

question 230

Multiple Choice

Harvey quit his job at State University, where he earned $45,000 a year. He figures his entrepreneurial talent or forgone entrepreneurial income to be $5,000 a year. To start the business, he cashed in $100,000 in bonds that earned 10 percent interest annually to buy a software company, Extreme Gaming. In the first year, the firm sold 11,000 units of software at $75 for each unit. Of the $75 per unit, $55 goes for the costs of production, packaging, marketing, employee wages and benefits, and rent on a building.The accounting profit of Harvey's firm in the first year was

• A)$220,000.
• B)$60,000.
• C)$160,000.
• D)$825,000.

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Definitions:

Avoidable Losses

Losses that could have been prevented through reasonable care or alternative actions.

Waiver

The voluntary relinquishment or surrender of a known right or privilege.

Relinquishment

Relinquishment involves voluntarily giving up or surrendering a right, position, or claim, often in a legal or formal context.

Contract

A legally enforceable agreement between two or more parties that creates mutual obligations.