Question

Didde Corp. reports operating expenses in two categories: (1) selling and (2) general and administrative. The adjusted trial balance at December 31, 2017 included the following expense and loss accounts:

Accounting and legal fees 210,000
Advertising290,000
Freight-out 120,000
Interest105,000
Loss on sale of long-term investment 45,000
Officers' salaries335,000
Rent for office space 330,000
Sales salaries and commissions355,000
One-half of the rented premises is occupied by the sales department. Didde's total selling expenses for 2017 are
1) $930,000
2) $810,000
3) $765,000
4) $645,000

Answer 1

The firm's accounting profit, calculated by subtracting explicit costs such as labor, capital, and materials from total revenues, was $50,000 for the last year.

Step-by-step explanation:

A Firm's Accounting Profit Calculation

Based on the provided details, we can calculate a firm's accounting profit by subtracting the sum of all explicit costs from the total revenues. Specifically, the firm had sales revenue of $1 million last year. The explicit costs included $600,000 on labor, $150,000 on capital, and $200,000 on materials. Therefore, to find the accounting profit, we perform the following calculation:

Total Revenues - (Labor Costs + Capital Costs + Material Costs) = Accounting Profit

$1,000,000 - ($600,000 + $150,000 + $200,000) = $1,000,000 - $950,000 = $50,000.

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