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geniusboy [140]
3 years ago
11

Gomez runs a small pottery firm. He hires one helper at $13,000 per year, pays annual rent of $5,500 for his shop, and spends $2

1,500 per year on materials. He has $40,000 of his own funds invested in equipment (pottery wheels, kilns, and so forth) that could earn him $5,500 per year if alternatively invested. He has been offered $19,000 per year to work as a potter for a competitor. He estimates his entrepreneurial talents are worth $2,500 per year. Total annual revenue from pottery sales is $75,000. Instructions: Enter your answers as whole numbers. a. Calculate the accounting profit for Gomez’s pottery firm. b. Now calculate Gomez's economic profit
Business
1 answer:
alisha [4.7K]3 years ago
8 0

Answer:

(a) $35,000

(b) $8,000

Explanation:

(a) Accounting profit:

= Total revenue - Explicit cost

= $75,000 - (wages + Annual rent + Material cost)

= $75,000 - ($13,000 + $5,500 + $21,500)

= $75,000 - $40,000

= $35,000

(b) Economic Profit:

= Total revenue - Explicit costs - Implicit costs

= $75,000 - (wages + Annual rent + Material cost) - (Income from investment + Earnings as a potter + Worth of entrepreneurial talents)

= $75,000 - ($13,000 + $5,500 + $21,500) - ($5,500 + $19,000 + $2,500)

= $75,000 - $40,000 - $27,000

= $8,000

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forsale [732]

Answer:

a. Failure to pay penalty = 400

b. Failure to file penalty = $4,000

Explanation:

The monthly rate for failure to pay penalty is 0.5% while the failure to file penalty.

Since it is assumed that there are 30 days in a month, the 35 days after the due date of the return without obtaining an extension from the IRS is will be counted as 2 months regardless of the fact that the second month is just 5 files when she filed.

Therefore, we have:

a. Failure to pay penalty = $40,000 * 0.5% * 2 = 400

b. Failure to file penalty = ($40,000 * 5% * 2) = $4,000

c. Total penalties = (Failure to file penalty - failure to pay penalty for the same period) + Failure to pay penalty = ($4,000 - $400) + $400 = $4,000.

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5 0
3 years ago
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Genrish500 [490]

Answer:

The unstated assumptions in the problems given is that the company may require more units of aluminium and steel, which would allow for producing more bicycles.A linear programming model cannot account for this.

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3 0
3 years ago
What percentage profit is made on a sale if the selling price is $225,000 and the purchase price is $190,000?
IgorLugansk [536]

The percentage profit = 18%

A profit is made on sale with selling price more than the purchasing price. The purchasing price is also known as the cost price.

Given the selling price = $225000

and the purchasing price = $190000

Since the selling price is more than the purchasing price, there is obviously a profit gained.

Now profit amount = Selling price - Purchasing price

                                = 225000-190000 = $35000

Profit percentage = (Profit / Purchasing price) x 100%

                             = (35000 / 190000) x 100%

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5 0
2 years ago
What you mean of economical and effective utilization of resources in food service management?
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Hope it helps you my dear:)
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3 0
3 years ago
What happens to the price and the quantity bought and sold in the cocoa market if countries producing cocoa experience a drought
Rashid [163]

Answer: Supply of cocoa will fall; Demand rises; Price increases.

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A drought is when there is little or no rainfall in a particular area. When countries that are producing cocoa experience a drought, this will lead to a reduction in the supply of cocoa as there will be lesser cocoa available for farmers to supply.

Then, due to the new study which is released demonstrating the health benefits of cocoa, this will lead to an increase in the demand for cocoa. The demand will rise and since there's increase in demand and reduction in supply, the price will rise.

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