Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Business Economics Expert

problem about Accounting Profits

A construction manager earning $70,000 per year working for a regional home builder decided to open his own home building company. He took $100,000 out of one of his investment accounts that had been earning 6% a year and used that money to start up the business. He worked hard the first year, hiring one employee (his only salary cost for the business was the $40,000 paid to this employee), and generated total sales of $1,000,000. Total material and subcontracted labor costs for the year was $900,000.

a). What is his yearly accounting profit for the business?

b). What is the yearly economic profit for the business?

Accounting profit = Total revenue - Explicit costs
Accounting profit = 1,000,000 - (900,000 + 40,000) = 60,000

b) Economic profit is the difference between total revenue and total economic cost
Economic profit = Total revenue - Explicit costs - Implicit cost

 

Business Economics, Economics

  • Category:- Business Economics
  • Reference No.:- M924053

Have any Question? 


Related Questions in Business Economics

1 suppose a local government has a tax digest of 500

1) Suppose a local government has a tax digest of $ 500 million and feels it must raise $ 15 million for the operation of the its school and general government. What would be the millage rate? 2) What characteristic of r ...

A firm in a purely competitive industry is currently

A firm in a purely competitive industry is currently producing 1,200 units per day at a total cost of $700. If the firm produced 1,000 units per day, its total cost would be $450, and if it produced 700 units per day, it ...

Fiberia accessories a clothing retailer is planning to

Fiberia Accessories, a clothing retailer, is planning to introduce a new line of sweaters as part of the winter collection for $65 with an inventory of 1500. The main selling season is 60 days between November and Decemb ...

In an advertisement for a professional employment

In an advertisement for a professional employment organization it was stated: “Outsourcing can be a cost-effective alternative to the expense and administrative burden of a traditional employer–employee relationship.” Ev ...

A major concern is a lack of funds for marketing as such

A major concern is a lack of funds for marketing. As such, Break-C will only be distributed in major metropolitan areas that account for 65% of U.S. breakfast drink market volume. Print ads will carry a coupon entitling ...

Standard industry classifications how are you doing

Standard Industry Classifications, How are you doing compared to others? Standard Industry Classification codes (SIC) are used for financial statement “benchmarks” analysis. Your company’s financial results would need to ...

When some runners in the new york city marathon hit the

When some runners in the New York City Marathon hit the Queensboro Bridge, temptation sets in and, rather than finishing the last 10 miles through Harlem and the Bronx, they hop a ride on the subway and head toward the f ...

1 a in your own words explain the difference between a

1 (a) In your own words, explain the difference between a movement along the demand curve and a shift in demand. Then, provide an example from your own personal life where you have experienced each one. In your own words ...

John and marge were married 26 years ago they have one

John and Marge were married 26 years ago. They have one child, Monica. Sometime in January 2013 after a particular fierce argument, John left the household and has not kept in touch, and his current whereabouts are unkno ...

Which of the following statements describes a change in the

Which of the following statements describes a change in the quantity supplied and which describes a change in supply?? I Farms are selling less chicken because the price of turkey has increased. II Farms are selling less ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

A cola-dispensing machine is set to dispense 9 ounces of

A cola-dispensing machine is set to dispense 9 ounces of cola per cup, with a standard deviation of 1.0 ounce. The manuf

What is marketingbullwhat is marketing think back to your

What is Marketing? • "What is marketing"? Think back to your impressions before you started this class versus how you

Question -your client david smith runs a small it

QUESTION - Your client, David Smith runs a small IT consulting business specialising in computer software and techno

Inspection of a random sample of 22 aircraft showed that 15

Inspection of a random sample of 22 aircraft showed that 15 needed repairs to fix a wiring problem that might compromise

Effective hrmquestionhow can an effective hrm system help

Effective HRM Question How can an effective HRM system help facilitate the achievement of an organization's strate