Harwood Company uses a job-order costing system that applies overhead cost to jobs on the basis of machine-hours. The company's
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Answer:
a. $800
b. $1,000
Explanation:
In this case, the opportunity cost of holding the money instead of buying a U.S. Treasury bond is determined as the yearly interest payed by the bond.
a. interest rate = 8%
The opportunity cost of keeping the $10,000 is:
b. interest rate = 10%
The opportunity cost of keeping the $10,000 is:
Answer: Accounting profit= $44,500
Economic Profit = $4,150
Explanation: <em>Accounting profit</em> are the profit earned by subtracting explicit cost from the total revenue earned.
<em>Economic profit</em> are profits lefts out after subtracting implicit (opportunity) cost and explicit ( monetary) costs. It is given by
In this case, the explicit cost include rental cost, office supplies, office staff and telephone expenses.
While, implicit cost include the 7% interest foregone on the $5000 savings and the salary foregone ($40,000) by choosing to startup a business than take up the job.