Asked by Alondra Cardenas on May 02, 2024
Verified
Given the information that follows,how much is the Foley family business's (a)accounting profits? (b)Economic profits? Sales: $4 million;total costs: $3.7 million;return they could have earned elsewhere: $80,000;wages the family members could have earned doing the same work for another firm: $250,000.
Economic Profits
Profits calculated by subtracting both explicit and implicit costs from total revenues, representing the additional value created beyond all resource costs.
Accounting Profits
The total revenue of a company minus the explicit costs and depreciation expenses.
Total Costs
Total costs represent the complete sum of all expenses incurred by a business in the production of goods or services, including both fixed and variable costs.
- Comprehend and distinguish between economic gains and accounting gains.
- Compute economic and accounting gains utilizing data from business operations.
- Examine the elements constituting total expenses and how they influence profitability.
Verified Answer
SM
swapnil mohaneMay 06, 2024
Final Answer :
Total revenue ($4,000,000)- Total cost ($3,700,000)= Accounting profit ($300,000)- Implicit cost ($80,000 + $250,000)= Economic profit (-$30,000)(Economic loss of $30,000).
Learning Objectives
- Comprehend and distinguish between economic gains and accounting gains.
- Compute economic and accounting gains utilizing data from business operations.
- Examine the elements constituting total expenses and how they influence profitability.