Question

Donnie's Donuts incurs $450,000 per year in explicit costs and $200,000 in implicit costs. The bakery earns $800,000 in revenues and has $2 million in net worth. Based on this information, what is the accounting profit for Donnie's Donuts?

Answer 1

$150,000

Step-by-step explanation:

Given that

Total revenue = $800,000

Explicit cost = $450,000

Implicit cost = $200,000

The computation of the accounting profit is as shown below :-

= Total revenue - Total cost

= $800,000 - $650,000

= $150,000

Total cost = Explicit cost -Implicit cost

= $450,000 + $200,000

= $650,000

Therefore for calculating the accounting profit we simply deduct the total cost from total revenue.