Answered

Look at the Data Below then answer/calculate the totals in the questions that follow.
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
Entrepreneur's potential economic profit from the next best entrepreneurial activity = $80,000
Entrepreneur's forgone interest on personal funds used to finance the business = $6,000
Answer these questions directly:
a) Creamy Crisp's explicit costs are:_______
A) $136,000.
B) $150,000.
C) $94,000.
D) $156,000.
b) Creamy Crisp's implicit costs (total) are :_______
c) Creamy Crisp's total economic costs (explicit + implicit costs) are:________
d) Creamy Crisp's accounting profit is:________
e) Creamy Crisp's economic profit is:________
f) If Creamy Crisp's revenue fell to $286,000, what is the new accounting profit and the new economic profits?

Answer :

Parrain

Answer and Explanation:

a. Explicit costs are actual costs incurred by the venture.

In this case those are;

= Annual lease on building + Payments to workers + Utilities (electricity, water, disposal) costs

= 22,000 + 120,000 + 8,000

= $150,000

b. Implicit costs are the opportunity costs (revenue foregone by not choosing other alternatives).

= Entrepreneur's potential earnings as a salaried worker  + Entrepreneur's potential economic profit from the next best entrepreneurial activity  + Entrepreneur's forgone interest on personal funds used to finance the business

= 50,000 + 80,000 + 6,000

= $136,000

c. Economic costs

= explicit + implicit costs

= 150,000 + 136,000

= $286,000

d. Accounting profit

= Revenue - explicit costs

= 380,000 - 150,000

= $230,000

e. Economic Profit

= Revenue - economic costs

= 380,000 - 286,000

= $94,000

f. New Accounting Profit

= Revenue - explicit costs

= 286,000 - 150,000

= $136,000

New Economic profit

= Revenue - economic costs

= 286,000 - 286,000

=$0

Other Questions