Question

Linda sells 100 bottles of homemade ketchup for $10 each. The cost of the ingredients, the bottles, and the labels was $700. In addition, it took her 20 hours to make the ketchup and to do so she took time off from a job that paid her $20 per hour. Instructions: Enter your answers as whole numbers.

Answer 1

Accounting profit = $300

Economic profit = $-100

Step-by-step explanation:

given data

sells = 100 bottles

selling cost = $10 each

labels = $700

make the ketchup = 20 hours

paid = $20 per hour

to find out

accounting profit and economic profit

solution

we get here Accounting profit that is express as

Accounting profit = Total Revenue - Total cost .................1

here Total revenue is = price × quantity

so Total revenue = 100 × $10

Total revenue = $1,000

so here put value in equation 1 we get

Accounting profit = $1000 - $700

Accounting profit = $300

so here

we get now Economic profit that is

Economic profit = accounting profit - implicit cost or opportunity cost ..............2

here Implicit cost is

Implicit cost = $20 × 20

Implicit cost = $400

put value in equation 2 we get

Economic profit = $300 - $400

Economic profit = $-100