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3 years ago

The following is cost information for the Creamy Crisp Donut Company:

Business

1 answer:

SCORPION-xisa [38]3 years ago

5 0

Answer:

Given:

Annual lease = $22000

Annual revenue = $380000

Payments = $120000

Utilities = $8000

Value (entrepreneur's talent ) = $80000

Forgone Entrepreneur's interest = $6000

Therefore, we'll first compute the accounting profit using the following formula :

Accounting profit = Annual revenue - Annual lease - Payments - Utilities

Accounting profit = 380000 - 22000 - 120000 - 8000

Accounting profit =$230000

Therefore, the economics profit can be evaluated using the following formula:

Economic profit = Accounting profit - Opportunity cost (Salary of entrepreneur) - Value (entrepreneur's talent) - Forgone Entrepreneur's interest

= 230000 - 50000 - 80000 - 6000

= $94000

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