Question

Wayman Corporation reports the following amounts in its December 31, 2024, income statement. What is the sales revenue?

1) $383,000
2) $300,000
3) $400,000
4) $500,000

Answer 1

The accounting profit is calculated by subtracting explicit costs like labor ($600,000), capital ($150,000), and materials ($200,000) from the total sales revenue ($1 million). The accounting profit for the firm is $50,000.

Step-by-step explanation:

Calculating Accounting Profit

To calculate the accounting profit, you need to subtract the explicit costs from the total sales revenue. In this case, the firm's total sales revenue is $1 million. The explicit costs include labor, which is $600,000, capital costs of $150,000, and materials which cost $200,000.

Using the formula:
Accounting profit = Sales revenue - (Labor costs + Capital costs + Material costs)

We can calculate it as follows:
Accounting profit = $1,000,000 - ($600,000 + $150,000 + $200,000)

This gives us an accounting profit of $50,000.