2 Gomez runs a small potery rm He hires one helper at $14 500 per year, pays ann

Question

2 Gomez runs a small potery rm He hires one helper at $14 500 per year, pays annual rent of $7.500 for his shop, and spends $18.000 per year on maternials He has $40,000 of his own funds invested in equipment (pottery wheels, kilins, and so forthl that could cam him $5.000 per year if atematively invested He has been offered $23,000 per year to work as a potter for a competnor. He estimates his entrepreneurial talents are worth S6.000 per year Total annual revenue trom potery sales is $96,000 ?????uctions. Efter your answers as whole numbers aCalculate the accounting profe for Gomer's pottery fem b. Now calculate Gomezs economic prote DOLL

Explanation / Answer

Computation of Accounting Profits: Sales revenue 86000 Less: Explicit cost Materila cocst 18000 Wages paid 14500 Rent paid 7500 Accounting Profits 46000 Computation of Economic Profits: Accounting Profits 46000 Less: Implicit cost Interest on investment 5000 Salary 23000 Entrpreneurial skills 6000 Economic Profits 12000

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