Question

Look at the Data Below then answer/calculate the totals in the questions that follow. (Show Workings)

Entrepreneur's potential earnings as a salaried worker = $50,000

Annual lease on building = $22,000

Annual revenue from operations = $380,000

Payments to workers = $120,000

Utilities (electricity, water, disposal) costs = $8,000

Entrepreneur's potential economic profit from the next best entrepreneurial activity = $80,000

Entrepreneur's forgone interest on personal funds used to finance the business = $6,000

Answer these questions directly:

a) Creamy Crisp's explicit costs are:

b) Creamy Crisp's implicit costs (total) are :

c) Creamy Crisp's total economic costs (explicit + implicit costs) are:

d) Creamy Crisp's accounting profit is: e)

Creamy Crisp's economic profit is: f)

If Creamy Crisp's revenue fell to $286,000, what is the new accounting profit and the new economic profits?

Answer 1