Question

The following is cost information for the Creamy Crisp Donut Company.Entrepreneur's potential earnings as a salaried worker = $50,000Annual lease on building = $22,000Annual revenue from operations = $380,000Payments to workers = $120,000Utilities (electricity, water, disposal) costs = $8,000Value of entrepreneur's talent in the next best entrepreneurial activity = $80,000Entrepreneur's forgone interest on personal funds used to finance the business = $6,000Creamy Crisp's total revenues exceed its total costs, including a normal profit, by

Answer 1

Answer:

Creamy Crisp's total revenues exceed its total costs, including a normal profit, by $366,000

Explanation:

Creamy Crisp's total revenue exceeds its total cost, including a normal profit by =

When answering this we use all the actual costs and revenue and all the hypothetical figures, or the opportunity costs and revenue as we need to calculate total revenue exceeding costs and normal profits.

Total revenue actual + potential = Entrepreneur's potential earnings as a salaried worker $50,000 + Annual revenue from operations $380,000 + 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

= $516,000

Total costs = Payments to workers $120,000 + Utilities (electricity, water, disposal) costs $8,000 + Annual lease on building = $22,000

= $150,000

Creamy Crisp's total revenues exceed its total costs including a normal profit by $516,000 - $150,000 = $366,000

Since normal profit is included and not excluded normal profit shall not be computed separately and the final answer is $366,000