The data in the table represents annual costs and revenue for Aurora%u2019s Orch
ID: 1178402 • Letter: T
Question
The data in the table represents annual costs and revenue for Aurora%u2019s Orchid Emporium. Aurora works 60 hours a week at the Orchid Emporium. Aurora owns the building that houses the Orchid Emporium, and if she closed the shop, she could rent out the building for $40,000 per year and go to work for Acme Flowers and earn a salary of $30,000 per year. Calculate the economic profit and economic cost for Aurora%u2019s Orchid Emporium. Are these figures the same as the accounting cost and accounting profit? Explain.
Wages Paid $22,000
Interest Paid on Loans $8,000
Other Expenditures for Factors
Of Productions $26,000
Total Revenue $115,000
Explanation / Answer
Accounting costs =22,000+8,000+26,000 =56,000
Revenue=115,000
Accounting profit=59,000$
if he rents and works at acme
rent revenue =40000$
salary =30000
revenue =70,000
Economic cost for aurora's orchid emporium = 56,000+70,000 = 126,000
Economic profit = (11,000$) of loss brackets indicates negative value
These figures are not same because accounting doesn't include opportunity cost which aurora is missing as the amount of rent and salary .this economic step would have more economically profitable for aurora with yield of 70000$ profit rather than the 59,000 accounting profit working in her own.
cheers :)
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.