Final answer:
To determine the accounting profit, subtract the total costs from the sales revenue. With a revenue of $1 million and total costs of $950,000 for labor, capital, and materials, the accounting profit for the firm is $50,000.
Step-by-step explanation:
The question involves reviewing a comparative income statement for Simeon Company. Specifically, the student is asked about the accounting profit of a firm with certain revenue and expenses within a comparative income statement’s framework.
When reviewing the income statement, to calculate the accounting profit, you subtract the total expenses from the total sales revenue. In the given scenario:
- Sales Revenue: $1,000,000
- Labor Costs: $600,000
- Capital Costs: $150,000
- Material Costs: $200,000
To find the accounting profit, we add up all the costs (labor, capital, and materials), which totals to $950,000 ($600,000 + $150,000 + $200,000). We then subtract this total cost from the sales revenue of $1,000,000.
Accounting Profit = Sales Revenue - Total Costs
Accounting Profit = $1,000,000 - $950,000
Accounting Profit = $50,000
Therefore, the firm’s accounting profit last year was $50,000.