Use the following is cost information for the Creamy Crisp Donut Company to answ
ID: 1118364 • Letter: U
Question
Use the following is cost information for the Creamy Crisp Donut Company to answer questions 50-54:
Entrepreneur's potential earnings as a salaried worker = $50,000
Annual lease on building = $22,000
Annual revenue from operations = $380,000
Payments to workers = $120,000
Utilities (electricity, water, disposal) costs = $8,000
Value of entrepreneur's talent in the next best entrepreneurial activity = $80,000
Entrepreneur's forgone interest on personal funds used to finance the business = $6,000
total economic costs are: & accounting profit is
A.
A.
Explanation / Answer
Accounting cost=22000+120000+8000=150000=Explicit cost
Accounting profit=Revenue-explicit cost=380000-150000=230000
Economic cost=accounting cost+implicit cost=150000+80000+6000=236000
Economic profit=380000-236000=144000