Practice Problems for Exam III Question 1 Cooke\'s Catering is owned by Dan Cook

Question

Practice Problems for Exam III Question 1 Cooke's Catering is owned by Dan Cooke. For the past year, Cooke's Catering had the following statement of revenues and costs Revenues Supplies Electricity and water Employee salaries Dan's salary $500,000 $150,000 $15,000 $50,000 $60,000 Dan has the option of closing his business and renting out the building he owns for $100,000 per year. In addition, Dan could go work for another catering company for $45,000 per year or for a high end restaurant for S75,000 nswer the following questions: a. b. c. What is Cooke's Catering's accounting cost? What is Cooke's Catering's economic cost? What is Cooke's Catering's economic profit?

Explanation / Answer

Accounting Costs are the costs explicitly and actually paid out costs

= 150000+15000+50000+60000

=275,000

Economic Costs = Accounting Costs + Imputed and opportunity costs = 275000+15000(The additional money he would have got if he worked for next best alternative of job at high end restaurant)

=290,000

Economic Profits = revenue - Economic Costs = 500000-290000 = 210,000

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.