The following is cost information for the Creamy Crisp Donut Company: Entreprene
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Question
The following is cost information for the Creamy Crisp Donut Company: Entrepreneur's potential earnings as a salaried worker = Dollar50,000 Annual lease on building = Dollar22,000 Annual revenue from operations = Dollar380,000 Payments to workers = Dollar120,000 Utilities (electricity, water, disposal) costs = Dollar8,000 Value of entrepreneur's talent in the next best entrepreneurial activity = Dollar80,000 Entrepreneur's forgone interest on personal funds used to finance the business = Dollar6,000 Refer to the data. Creamy Crisp's economic profit is:Explanation / Answer
In the calculation of economic profit, we take into account opportunity costs.
Economic profit = Total benefit - total Implicit costs and explicit costs
Economic profit = $380,000 - ($50,000 + $22,000 + $120,000 + $8,000 + $80,000 + $6,000)
Economic profit = $94,000
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