A covered fire shuts a bakery for four months. It would have earned $9,000 a month in net income, and it must keep paying $6,000 a month in continuing normal operating expenses. What is its business income loss?
Explanation
Business income is the net income the business would have earned plus the normal operating expenses that continue during the suspension, including payroll the insured keeps paying. Each month of the shutdown costs $9,000 plus $6,000, or $15,000, and four months gives four times $15,000, or $60,000. The $36,000 figure counts only lost net income and the $24,000 figure counts only continuing expenses, so both understate the loss.
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