Question
This is a homework problem we were given. I don't even knowwhere to start :( 1. You own a business that produces plastic milk containers.You produced 20,000,000 sold for $.025 each and 5,000,000 for $.015each. -labor costs were $200,000 -Utility costs were $28,000 -Raw Materials were $126,000 -Insurance and office supplies were $49,000 -Depriciation for the year was $69,000 You no longer want to run the business and find someone whowill rent your business facility for $40,000/yr. but the only jobyou can find working for that same person is as a janitor in thebuilding you would rent to him paying $18,000/yr. What are the accounting profit and economic profit for yourbusiness? We must show our work. This is a homework problem we were given. I don't even knowwhere to start :( 1. You own a business that produces plastic milk containers.You produced 20,000,000 sold for $.025 each and 5,000,000 for $.015each. -labor costs were $200,000 -Utility costs were $28,000 -Raw Materials were $126,000 -Insurance and office supplies were $49,000 -Depriciation for the year was $69,000 You no longer want to run the business and find someone whowill rent your business facility for $40,000/yr. but the only jobyou can find working for that same person is as a janitor in thebuilding you would rent to him paying $18,000/yr. What are the accounting profit and economic profit for yourbusiness? We must show our work.
Explanation / Answer
ok step by step 1. mutiply 20 milion milk containers that were sold for.025=$500k 2. mutiply 5 million milk containers that were sold for.015=$75k Add up your total sells ($500k+$75k) Add up all of your costs labor($200,000)+Utility($28,000)+RawM($126,000)+Ins($49,000)+Depriciation($69,000) =$472,000 So your profit would be Sells subtract costs=575,000-472,000=$103,000 __________________________________________________________________________ Second case if you would rent it to him and let him hire you as a janitorit would be $58,000 a year in profit subtract other costs such asproperty taxes and income taxes. It is variable so it would depend on your local taxes