Final answer:
The firm's accounting profit is calculated by subtracting explicit costs (labor, capital, and materials) from the total sales revenue. With sales revenue of $1 million and explicit costs totaling $950,000, the firm's accounting profit comes to $50,000.
Step-by-step explanation:
Calculating Accounting Profit
To calculate the firm's accounting profit, we need to subtract the explicit costs from the total revenues. In this case, the firm had sales revenue of $1 million. The explicit costs include labor, capital, and materials, which amount to $600,000, $150,000, and $200,000, respectively. By subtracting these costs from the sales revenue, we arrive at the accounting profit.
Accounting Profit Calculation:
Total Revenues = $1,000,000
Explicit Costs = Labor ($600,000) + Capital ($150,000) + Materials ($200,000) = $950,000
Accounting Profit = Total Revenues - Explicit Costs = $1,000,000 - $950,000 = $50,000.
This calculation shows that the firm's accounting profit was $50,000 last year. It is important to note that this figure does not take into account any implicit costs that might affect the firm's economic profit.