Question

If a company uses the first in first out method and the periodic inventory system, what would be the cost of the ending inventory?

Answer 1

The firm's accounting profit is the difference between the sales revenue of $1 million and the total costs of $950,000, resulting in an accounting profit of $50,000.

Step-by-step explanation:

The question concerns the calculation of accounting profit. To determine the accounting profit, we must subtract the total costs from the sales revenue. The firm had sales revenue of $1 million. The expenses were $600,000 for labor, $150,000 for capital, and $200,000 for materials. The total costs are the sum of these expenses, which amount to $950,000 ($600,000 + $150,000 + $200,000). Therefore, the accounting profit is calculated as follows:

Sales revenue - Total costs = Accounting profit

$1,000,000 - $950,000 = $50,000

The firm's accounting profit is $50,000.