Graded Assignment Back to Assignment Due Sunday 11.26.17 at 11:45 PM Attempts: A
ID: 2789813 • Letter: G
Question
Graded Assignment Back to Assignment Due Sunday 11.26.17 at 11:45 PM Attempts: Average: /4 1. Accounting versus economic costs Aa Aa During a particular year, suppose a consulting firm has the following costs: $610,000 in wages and salaries paid to $74,000 in rental payments for office space; and $23,000 for office supplies, advertising, and utilities. In addition, Victor, the owner of the firm, works for the firm full time (and does not receive a salary, since he gets the firm's profit). If he did not work for the consulting firm, Victor could earn $125,000 per year working as a consultant for another firm. For each possible amount of total revenue in the following table, fill in the accounting profit and economic profit of the consulting firm. Total Revenue Accounting Profit Economic Profit 710,000 760,000 810,000 860,000 3,000 53,000 103,000 153,000 ONA 3. che midterm review.pdf Managerial Econ pptxExplanation / Answer
Economic profit = Total revenue - [ Explicit costs + Implicit costs ]
Explicit cost consists of wages and salaries, rental payments, office supplies = $ 707,000
Implicit costs consists of the cost of foregone opportunities i.e. the wages Victor could have earned as a consultant for another firm.
Implicit costs = $ 125,000
Economic profit = Total revenue - [ Explicit costs + Implicit costs ]
Economic profit = $ 710,000 - [ $ 707,000 + $ 125,000 ]
Economic profit = - $ 122,000
___________________________________________
Economic profit = $ 760,000 - [ $ 707,000 + $ 125,000 ]
Economic profit = - $ 72,000
___________________________________________________
Economic profit = $ 810,000 - [ $ 707,000 + $ 125,000 ]
Economic profit = - $ 22,000
_______________________________________________________________
Economic profit = $ 860,000 - [ $ 707,000 + $ 125,000 ]
Economic profit = $ 28,000
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