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Marysya12 [62]
3 years ago
13

Suppose that a firm earned​ $500,000 in total revenue. At the same​ time, it incurred labor costs of​ $200,000; economic depreci

ation of​ $50,000; normal profit of​ $75,000; interest paid to the bank of​ $25,000; and used other factors of production that cost​ $100,000. The economic profit earned by the firm equals:
Business
1 answer:
Scorpion4ik [409]3 years ago
3 0

Answer: $50,000

Explanation:

Given the following ;

Total Revenue = $500,000

Labor cost = $200,000

Economic Depreciation = $50,000

Normal profit = $75,000

Interest paid to bank = $25,000

Other cost of production = $100,000

Economic profit = (Total revenue - labor cost - economic Depreciation - normal profit - interest paid to bank - other production cost))

Economic profit =$ (500,000 - 200,000 - 50,000 - 75,000 - 25,000 - 100,000)

Economic profit = $50,000

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Evans Ltd. is now considering the possibility of offering a lifetime membership option to its subscribers. Under this proposal,
Ahat [919]

Answer: $329.75

Explanation:

The one year subscription is $40 per year. It is estimated that the average age of current subscribers is 38 and they will leave on average to 78. This means that they will leave for,

= 78 - 38

= 40 years

Evans Ltd  average interest rate on long-term debt is 12% so this means that we can use that 12% as a discount rate for the cash-flow expected.

I have attached a Present Value Interest Factor of an Annuity table to this question. It helps calculate annuities faster.

The above can be treated as an annuity because the $40 is constant every year.

The present value of the $40 over 40 years can be calculated by,

= $40 * present value Interest Factor of an Annuity for 40 years at 12% (look at the table for where 40 years on the y axis intersects with 12% on the x axis)

= $40 * 8.2438 (this is the figure when it is not rounded off to 3 dp)

= $329.752

= $329.75

This shows that the lifetime flat fee of $480 is more profitable for Evans Ltd as opposed to the yearly subscription. They should therefore try to sell more of the lifetime contract with the flat fee.

3 0
3 years ago
The formula for the production budget is budgeted sales in units plus desired ending merchandise inventory less beginning mercha
Deffense [45]

Answer:

desired ending finished goods units less beginning finished goods units.

Explanation:

production budget can be regarded as budget that gives the calculation of the number of units of particular products which is needed to be manufactured, this is comprises the sales forecast as well as amount of finished goods inventory that is planned to have on hand.

It should be noted that the formula for the production budget is desired ending finished goods units less beginning finished goods units..

7 0
3 years ago
Income Statement, Retained Earnings Statement, and Balance Sheet The amounts of the assets and liabilities of Glacier Travel Ser
pashok25 [27]

Answer:

  Income Statement Dec. 31, 20Y6

<u>           Glacier Travel Service                 </u>

Total revenue                        $900,000

- Wages expense                 ($425,000)

- Rent expense                     ($180,000)

- Utilities expense                 ($75,000)

- Supplies expense               ($38,000 )

<u>- Miscellaneous expense     ($37,000) </u>

EBIT                                        $145,000

<u>- Taxes                                   ($30,000)</u>

Net profit                                $115,000

4 0
3 years ago
Petro Roos is thinking of purchasing the business premises rather than renting it. Provide Two separate advantages and two separ
lilavasa [31]

Answer:

Advantages of buying business premises

There are considerable advantages to securing a mortgage to buy business premises, including:

  1. your mortgage repayment is likely to be similar to or less than a rental payment on the same property
  2. with a fixed rate mortgage, your monthly repayments will be predictable
  3. you aren't exposed to any sudden, large rent increases
  4. you may be able to sublet any free space, reducing your monthly repayments (you may require permission from your lender to do so) and allowing you to generate extra income
  5. interest payments on a commercial mortgage are tax-deductible
  6. any gain in value of the property will increase your capital
  7. as your business grows, you may be able to extend your existing premises, avoiding relocation costs
  8. you have control over what alterations you want to make to your office space

Disadvantages of buying business premises

The disadvantages of buying business premises include the following:

  1. Unlike renting, you'll need to come up with a substantial mortgage deposit - this is money that might be used for more important business purposes.
  2. If you own premises, you may find it harder to relocate your business, because selling business premises is a complex and sometimes lengthy process. If you rent, you may be able to negotiate to end your rental agreement, or to find another organisation to take over your tenancy at short-notice.
  3. If you have a variable rate mortgage, you are exposed to increases in interest rates.
  4. Owning a property means you'll be responsible for factors such as maintenance, fixtures and fittings, insurance, decoration and security, which can prove expensive.
  5. Repaying a commercial mortgage
  6. Commercial mortgage fees and costs
  7. Book traversal links for Advantages and disadvantages of buying business premises

Explanation:

4 0
3 years ago
E3-18 Comparing cash and accrual basis accounting and applying the revenue recognition principle Momentous Occasions is a photog
dusya [7]

Answer:

Momentous Occasions

a. Revenue of $1,000 is recognized on April 2, though the cash receipt is recorded on March 3 as deferred revenue.  This means that the recognition occurred on a separate date from when the cash was received.

b. Revenue of $4,100 will be recognized on the date the party is held and not on the February 28 date when the cash was received.  This means that the recognition occurred on a separate date from when the cash was received.

Explanation:

Momentous Occasions is required to recognize revenue on the date the service is performed and not when the cash is received in accordance with the accrual concept, unless it chooses to use the cash basis as a small business.

4 0
3 years ago
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