Question

Lloyd inc. has sales of $200,000, a net income of $15,000, and the following balance sheet:

Answer 1

To determine the firm's accounting profit, we deducted the total costs of labor, capital, and materials from the sales revenue which resulted in an accounting profit of $50,000.

Step-by-step explanation:

Calculating the Firm's Accounting Profit

To calculate the firm's accounting profit, we need to subtract the total costs from the sales revenue. In this scenario, the firm had a sales revenue of $1 million. The costs include $600,000 for labor, $150,000 for capital, and $200,000 for materials. So, the total costs amount to $950,000 ($600,000 + $150,000 + $200,000).

Now, subtracting the total costs from the sales revenue:

$1,000,000 (sales revenue) - $950,000 (total costs) = $50,000 (accounting profit)

Therefore, the firm's accounting profit for last year was $50,000.