Question

M&R Company provided $2,100 in services to customers in December, which are not yet recorded. Those customers are expected to pay the company in January following the company's year-end. What is the total amount of services provided by M&R Company in December?

1) $1,500
2) $2,100
3) $2,500
4) $3,000

Answer 1

The total amount of services provided by M&R Company in December is $2,100. The firm's accounting profit from the example is $50,000, calculated by deducting the total costs from the sales revenue.

Step-by-step explanation:

The total amount of services provided by M&R Company in December is $2,100. This figure represents the services that were provided but not yet recorded, meaning the revenue has been earned but the cash has not yet been received, which is a common situation at the end of an accounting period. To calculate the firm's accounting profit from the provided activity levels and costs, one would subtract the total cost of labor, capital, and materials from the sales revenue.

For example, if a firm had sales revenue of $1 million, then spent $600,000 on labor, $150,000 on capital, and $200,000 on materials, the accounting profit would be calculated as:

Sales Revenue: $1,000,000

• Total Cost of Labor: $600,000
• Total Cost of Capital: $150,000
• Total Cost of Materials: $200,000

Accounting profit = Sales Revenue - (Labor Costs + Capital Costs + Materials Costs)

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