Sapling Learning | Map. Reggie owns and operates a cheese shop in the village of

Question

Sapling Learning | Map. Reggie owns and operates a cheese shop in the village of Somerset. While Reggie has a degree in mechanical engineering and could easily go to work for his brother's company earning $80,000 a year, his true passion is for cheese. Below is a list of Reggie's expenses from 2010. Please use the information provided to answer the questions that follow. Revenue from 2010 Rent Equipment Supplies $95,000 19,000 7,000 $ 3,000 What is Reggie's accounting profit? What is Reggie's economic profit? Number $29000 Tools x 102 $66000 O Check Answer Next Exit Hint of use about us

Explanation / Answer

Accounting profit = Total Revenue - Total Cost = 95,000 - (Rent + Equipment + Supplies)

= 95,000 - 19,000 - 7,000 - 3,000 = 95,000 - 29,000 = $ 66,000

Economic profit = Total revenue - Total cost including implicit cost = 95,000 - (29,000 + 80,000)

= 95,000 - 109,000 = - $ 14,000

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