Answer:
Accounting profit = $60000
Economic profit = $38000
Explanation:
Accounting profit is the net income of a company, it is the difference between revenue and expenses. This expenses are wages, transportation cost, cost of raw materials and so on. It makes use of only explicit cost.
Economic profit makes use of both implicit cost (opportunity) and explicit costs. It does not only considers expenses but also considers opportunity costs for making one decision instead of the other
Given that revenue = $350000
Explicit cost = Administrative cost + Feed + Equipment and maintenance + Labor + Transportation + Miscellaneous + owners salary = $35,000 + $40,000 + $55,000 + $90,000 + $20,000 + $35,000 + $15000 = $290000
Implicit cost = opportunity cost = Cost of her daughter’s time that helps on weekends + Foregone rent for the land used for cattle grazing = $18000 + $4000 = $22000
Accounting profit = Revenue - Explicit cost = $350000 - $290000 = $60000
Economic profit = Revenue - Explicit cost - Implicit profit = $350000 - $290000 - $22000 = $38000
