Question

Mr.

Stracci's business had a great year this past year. The company had
$838000 in sales, $420000 in costs of good sold, $164000 in
administrative expenses, and $121000 in depreciation expense. The
bu
Mr. Stracci's business had a great year this past year. The company had \( \$ 838,000 \) in sales, \( \$ 420,000 \) in costs of good sold, \( \$ 164,000 \) in administrative expenses, and \( \$ 121,00

Answer 1

The firm's accounting profit is calculated by subtracting the explicit costs of labor, capital, and materials from the total sales revenue. With sales revenue of $1 million and total costs of $950,000, the firm's accounting profit is $50,000.

Step-by-step explanation:

Accounting profit, also referred to as bookkeeping profit or financial profit, is net income earned after subtracting all dollar costs from total revenue. In effect, it shows the amount of money a firm has left over after deducting the explicit costs of running the business. The accounting profit of a firm is calculated by subtracting explicit costs from total sales revenue.

In the given scenario, where a firm had sales revenue of $1 million last year and incurred costs of $600,000 on labor, $150,000 on capital, and $200,000 on materials, the accounting profit can be determined through a simple calculation: Accounting Profit = Total Revenues - Explicit Costs = $1,000,000 - ($600,000 + $150,000 + $200,000)
= $1,000,000 - $950,000 = $50,000. Therefore, the firm's accounting profit for the last year was $50,000.