the following is cost information for the creamy crisp donut company entrepreneu

Question

the following is cost information for the creamy crisp donut company

entrepreneur's paud earnings in this business=50000

annual lease on building=22000

annual sales revenue from operations=380000

payments to workers=120000

utilities(water,disposal,electricity) costs=8000

value of the business owner's talent in the next best entrepreneurial activity= 100000

entrepreneur's forgone interest on personal funds used the finance the business=6000

creamy crisp's accouting profit= ?

economic profit is = ?

Explanation / Answer

Accounting Profit=Annual Sales-(Annual Lease+Salary+Payment to Workers-Utility)=380000-22000-50000-120000-8000)=180000

Economic Profit=AccountingProfit-Opportunity Cost(Value of Business Owner+Interest Forgone on 6000)

EconomicProfit=180000-100000-6000=74000

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