Final answer:
The accounting profit is found by subtracting explicit costs such as labor, capital, and materials from sales revenue. In the reference example, with a sales revenue of $1 million and total costs of $950,000, the firm's accounting profit would be $50,000.
Step-by-step explanation:
The question asked about the calculation of accounting profit for Crane Corporation given its sales revenue, the cost of goods sold, and administrative expenses. To find the accounting profit, one needs to subtract all the explicit costs from the sales revenue. Explicit costs here would include the costs such as labor, capital, materials, and any other costs directly related to the production of goods or services.
Using the provided reference information, if a firm had sales revenue of $1 million, and it spent $600,000 on labor, $150,000 on capital, and $200,000 on materials, the firm's accounting profit would be calculated as follows:
Total Sales Revenue: $1,000,000
Total Explicit Costs: $600,000 (labor) + $150,000 (capital) + $200,000 (materials) = $950,000
Accounting Profit: $1,000,000 - $950,000 = $50,000
This example demonstrates how to calculate the accounting profit by deducting explicit costs from total sales revenue.