Answer:
Definition of Economic Costs
Implicit and Explicit Costs:
The wholesale cost for the pianos that Darnell pays the manufacturer Explicit Cost
The salary Darnell could earn if he worked as an accountant Implicit Cost
The wages and utility bills that Darnell pays Explicit Costs
The rental income Darnell could receive if he chose to rent out his showroom Implicit Cost
Complete the following table by determining Darnell's accounting and economic profit of his piano business.
Profit
(Dollars)
Accounting Profit $89,000
Economic Profit $3,000 ($89,000 - 86,000)
If Darnell's goal is to maximize his economic profit, he( should, should not) stay in the piano business because the economic profit he would earn as an accountant would be $__86,000____.
This economic profit includes the rental and salary income that Darnell can earn.
Explanation:
a) Data:
Sales Revenue = $842,000
Cost of goods sold 452,000
Wages & Utilities = 301,000
Opportunity cost of showroom = $38,000
Opportunity cost of employment = $48,000
Total opportunity cost = $86,000
Profit (Dollars)
Sales Revenue = $842,000
Cost of goods sold 452,000
Gross profit $390,000
Wages & Utilities = 301,000
Net Income $89,000
Opportunity cost of showroom = $38,000
Opportunity cost of employment = $48,000
Total opportunity cost = $86,000
