Question

Sheffield Company reports the following for the month of June.

a) Profit and Loss Statement
b) Balance Sheet
c) Cash Flow Statement
d) Income Statement

Answer 1

To find the firm's accounting profit, total expenses are subtracted from the sales revenue which results in an accounting profit of $50,000.

Step-by-step explanation:

The accounting profit for a firm can be calculated by subtracting the total expenses from the total sales revenue. In the scenario provided, the calculations would be as follows:

1. Calculate total expenses by adding labor, capital, and material costs together: $600,000 (labor) + $150,000 (capital) + $200,000 (materials) = $950,000.
2. Subtract the total expenses from the sales revenue to find the accounting profit: $1,000,000 - $950,000 = $50,000.

Therefore, the firm's accounting profit last year was $50,000.