Question

Ebbers Corporation increases its ending inventory balance by $15,000 in the current year. .

a) Financial gain
b) Inventory management
c) Tax implications
d) Profit margin

Answer 1

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

Step-by-step explanation:

The accounting profit of the firm can be calculated by subtracting the explicit costs from the total revenues. In this case, the total revenues are $1 million and the explicit costs are the sum of labor, capital, and materials costs, which is $600,000 + $150,000 + $200,000 = $950,000. Therefore, the accounting profit of the firm is $1,000,000 - $950,000 = $50,000.