Question

Sales for the year were $159,000. The balance sheet at the end of the year is given below: What is the fixed asset turnover ratio? What is the fixed asset turnover ratio?What is the total asset turnover ratio?

Answer 1

To calculate the firm's accounting profit, subtract the total expenses ($950,000) from the sales revenue of $1 million, thus the accounting profit would be $50,000.

Step-by-step explanation:

To calculate the firm's accounting profit, subtract the total expenses from the total sales revenue. In this scenario, the sales revenue was $1 million.

The total expenses include the cost spent on labor, capital, and materials. Here's how the calculation would look:

1. Sales Revenue: $1,000,000
2. Total Expenses = Labor ($600,000) + Capital ($150,000) + Materials ($200,000)
3. Total Expenses = $950,000
4. Accounting Profit = Sales Revenue - Total Expenses
5. Accounting Profit = $1,000,000 - $950,000
6. Accounting Profit = $50,000

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