Question

A company reported sales of $715,400 and incurred a cost of goods sold amounting to $286,400. Calculate the gross profit for the company based on this financial information.

Answer 1

The firm's accounting profit is $50,000.

Step-by-step explanation:

The accounting profit can be calculated by subtracting the explicit costs from the total revenues. In this case, the explicit costs are the labor cost, capital cost, and material cost, which amount to $600,000, $150,000, and $200,000 respectively. Therefore, the total explicit costs are $600,000 + $150,000 + $200,000 = $950,000.

To find the accounting profit, we subtract the explicit costs from the total revenues, which is $1,000,000 in this case. Accounting profit = $1,000,000 - $950,000 = $50,000. So, the firm's accounting profit is $50,000.