The firm's accounting profit is found by subtracting total expenses from sales revenue. After calculating the expenses ($950,000) and subtracting them from the sales of $1 million, the accounting profit is $50,000.
Accounting Profit Calculation
The firm's accounting profit can be calculated by subtracting the total expenses from the total sales revenue. To find the expenses, we add up the costs of labor, capital, and materials. So, the expenses are $600,000 for labor, $150,000 for capital, and $200,000 for materials, giving us a total expense of $950,000. Now, we subtract this amount from the sales revenue of $1 million.
Sales Revenue: $1,000,000
Total Expenses: $600,000 (labor) + $150,000 (capital) + $200,000 (materials) = $950,000
Accounting Profit: $1,000,000 - $950,000 = $50,000
The firm's accounting profit for last year was therefore $50,000.
The probable question may be:
On May 5, the bakery owner recorded financial transactions for the day. The data shows that the bakery received $200 and spent $150. Considering this information, did the bakery owner receive more money or spend more money on May 5, and how?
Additional Information:
Imagine the bakery owner, a friendly and enthusiastic person, keeping track of the day's transactions. The $200 received came from a surge in morning sales, where customers flocked to buy the freshly baked cinnamon rolls and aromatic coffee. On the spending side, $150 was used to restock baking supplies, ensuring that the delightful treats would continue to enchant customers.
In this scenario, you can discuss how the bakery owner experienced a positive financial flow with $200 in earnings, reflecting the success of the bakery's offerings. The spending of $150 can be explained as a wise investment in maintaining the quality and variety of baked goods, contributing to the bakery's long-term success.