Had to look for the options and here is my answer.
What happens when all of the capacity on a product line is being sold is that, the inventory from that line will be sold at HALF OF THE PRICE OR VALUE AS IT IS REFLECTED ON THE RECORDS OF ACCOUNTING DEPARTMENT. Hope this answer helps.
Answer:
a)
1. Explicit cost
2. Implicit Cost
3. Implicit Cost
4. Explicit cost
b)
Accounting Profit is $62000.
Economic Profit is -$3000. (a loss of $3000)
Explanation:
a)
Explicit costs are those costs incurred by a business that require an outlay of money as a result of operating a business.
Implicit costs, on the other hand, are the costs that do not require an outlay of money as a result of operating a business. They are instead the opportunity costs of operating a business or the benefits that are foregone.
1. The wages and utility bills are a result of operating a business and requires and outlay of money as their payment. They are <u>explicit costs.</u>
2. The rental income could have been earned if Larry rented the showroom he is using to operate his business from. The rent foregone is an opportunity cost and is an <u>implicit cost.</u>
3. The salary Larry could have earned is also something that Brian has to forego to operate his business and is an <u>implicit cost.</u>
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4. The cost of purchases paid to manufacturer requires outlay of money and is an <u>explicit cost.</u>
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b)
Accounting profit = Total Revenue - Total explicit cost
Economic profit = Total revenue - (Total Explicit Cost + Total Implicit Cost)
Accounting Profit = 793000 - 430000 - 301000 = $62000 profit
Economic profit = 793000 - (430000 + 301000 + 15000 + 50000) = -$3000 loss
Answer:
if the loss is less than fixed costs
Price exceeds the average variable cost.
Explanation:
If a business is making losses and wants to shut down operations, it will need to keep paying the fixed cost component.
In a case where the loss made from running the business is less than the fixed cost that will be incurred, it is better for the business to keep producing in the short run. The cost of closing up will be higher.
Also the business should stay open if the price of a product is higher than its average variable cost. This is because as production increases the positive contributing margin will eventually exceed cost incurred. This can be achieved by scaling production upward.
Though here are few differences between State and Government, State is a sovereign authority. While Government uses the sovereign authority of the state as an element. ... State is a larger entity is includes all individuals, associations and institutions that exist within its territorial boundaries.
The information given regarding the marginal revenue is illustrated below.
<h3>How to illustrate the information?</h3>
Marginal revenue is the increase in revenue that results from the sale of one additional unit of output.
While marginal revenue can remain constant over a certain level of output, it follows from the law of diminishing returns and will slow down when the output level increases.
Here, the price effect dominates the quantity effect so he cannot increase the production from 7 units to 8 units.
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