Use the following is cost information for the Creamy Crisp Donut Company to answ

Question

Use the following is cost information for the Creamy Crisp Donut Company to answer questions 50-54:
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
Value of entrepreneur's talent in the next best entrepreneurial activity = $80,000
Entrepreneur's forgone interest on personal funds used to finance the business = $6,000

total economic costs are: & accounting profit is

A.

A.

Explanation / Answer

Accounting cost=22000+120000+8000=150000=Explicit cost

Accounting profit=Revenue-explicit cost=380000-150000=230000

Economic cost=accounting cost+implicit cost=150000+80000+6000=236000

Economic profit=380000-236000=144000

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