How do I solve the accounting and economic profit for the following:
Suppose Kristen owns and operates a piano store. On average her total revenur i $200k and her total costs are $150k yearly. The market clearing price for renting her facilities are $10k, and she knows for certain that she could earn a salary of $45k a year working as an assistant manger at another company
please help, thank you!
Tanya imports sweaters from Peru and sells them from her home. She collects $400,000 in revenue a year, and spends $200,000 on the sweaters and shipping costs, as well as $25,000 on accounting services and utilities. She used to make $100,000 per year working for an advertising agency. Now she works out of the basement of her house, for which she doesn’t have any other marketable use. She has no other expenses.
Tanya’s economic profit is:
A. -$25,000
B. $100,000
C. $75,000
D. $175,000
I know that accounting profit is $175,000 and the equation for economic profit is economic profit = accounting profit - opportunity cost.
I’m just unsure which counts as opportunity cost bc my answer is not one of the choices ><
THANKS!
SORRY!!
The TITLE of the question is wrong...i meant ECONOMIC PROFIT!
What is the accounting profit and the economic profit given the following information…
Sales @ $100.00
Employee expense @ $40.00
Inventory expense @ $20.00
Value of owners labor @ $40.00
My guess is $40.00 accounting profit and $0.00 economic profit…close?
I’m learning about how long run output/profits affect entry and exit in a perfect competition market. To my knowledge, firms enter and exit until all firms earn zero economic profit. What I don’t understand is why firms would continue operating if they were making zero economic profit? Why would they want to operate in a market that makes no profit?
Please explain to me. I think I’m missing a point here. Thanks.
Why are economists more interested in economic profit than accounting profit? Can economic profit be negative even though accounting profit is positive? Why or why not?
In the area of cost-volume-profit analysis, the contribution margin ratio shows how much each dollar of sales contributes to:
A) Covering the fixed costs of the business and providing operating income.
B) Fixed expenses and variable expenses.
C) Variable expenses and interest charges.
D) Variable expenses when production is at normal capacity.
John and Ruth Brown decide to open a delicatessen in a building that they own in a shopping center. They invested $60,000 of their own financial capital in it and considered its management to be their full-time jobs. Total Revenue or sales is $140,000 [20,000 meals @ average price of $7.00] per month. Cost of goods sold is $60,000 per month and operating expenses is $50,000 per month. If John and Ruth worked for someone else, they expected to earn a monthly salary of $12,000. John and Ruth could rent the building to someone else and expected to earn a monthly rental income of $5,400. If John and Ruth invested the $60,000 capital elsewhere [with equal risk], they expected to earn $600 per month of interest income.
.4 Calculate John and Ruth’s accounting profit, Show all work. ***(Should I subtract the $60,000 they invested here?!?!?)***
Accounting Profit = Revenue – Explicit Expense
Accounting Profit = $140,000 – [$60,000 + $50,000]
Accounting Profit = $30,000
If one were to sell a product with a portion of the benefits going to charity, how much profit would be considered reasonable?
How do I solve the accounting and economic profit for the following:
Suppose Kristen owns and operates a piano store. On average her total revenur i $200k and her total costs are $150k yearly. The market clearing price for renting her facilities are $10k, and she knows for certain that she could earn a salary of $45k a year working as an assistant manger at another company
There are many companies especially in IT sector which make huge profits. For example, Google and Microsoft have already made billions of dollars as profit. Does that mean they overpriced their products and made these huge profits. To make it clear, are we not paying more for Windows software or advsertising in Google? I would like to know experts opinion in this regard.