Answer:
Economic profit = $5000
Explanation:
given data
value of assets less debt = 200000.
return = 10% per year
total revenue this year = 295000
solution
we consider here that
payroll wage and salaries = $100000
interest paid = 40000
depreciation on equipment = 80000
supplies utility = 50000
so here we get first Total cost that is
Total cost = payroll + interest paid + depreciation + supplies .................1
put here value and we get
Total cost = 100000 + 40000 + 80000 + 50000
Total cost = $270000
Thus,
Accounting profit = Total revenue - total cost ..............2
Accounting profit = 295000 – 270000
Accounting profit = $25000
and we know Opportunity cost is
Opportunity cost = 10% of $200000
Opportunity cost = 10% × 200000
Opportunity cost = $20000
so here Economic profit will be
Economic profit = accounting profit - opportunity cost ..............3
Economic profit = 25000 - 20000
Economic profit = $5000
