Final answer:
The firm's accounting profit is derived by subtracting the total explicit costs from the total revenues. Based on a revenue of $1 million and costs totaling $950,000, the accounting profit is $50,000.
Step-by-step explanation:
To calculate the accounting profit, we need to consider the firm's total revenues and subtract the explicit costs incurred during the year. In the scenario given, the firm had sales revenue of $1 million last year. The explicit costs are composed of $600,000 spent on labor, $150,000 spent on capital, and $200,000 spent on materials.
The calculation is as follows:
- Total Revenues: $1,000,000
- Total Explicit Costs: $600,000 (labor) + $150,000 (capital) + $200,000 (materials) = $950,000
Therefore, the firm's accounting profit is:
Accounting Profit = Total Revenues - Total Explicit Costs
= $1,000,000 - $950,000
= $50,000.