Gumez runs a small pottery firm he hires one helper at $12,000 per year, pays annual rent of $5,000 for his shop, and spends $20,000 per year on material. He has $4,0,000 of his own founds invested in equipments that could earn him $4000 per year if alternatively invested. He has been offered $15,000 per year to work as a potter for a compertoir. H estimates his entre talent are worth $3000 per year. total annual revenue from pottery sale is #72,000.Calculate the accounting profit and the economic profit for Gomez's pottery firm

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Asked Nov 2, 2019
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Gumez runs a small pottery firm he hires one helper at $12,000 per year, pays annual rent of $5,000 for his shop, and spends $20,000 per year on material. He has $4,0,000 of his own founds invested in equipments that could earn him $4000 per year if alternatively invested. He has been offered $15,000 per year to work as a potter for a compertoir. H estimates his entre talent are worth $3000 per year. total annual revenue from pottery sale is #72,000.

Calculate the accounting profit and the economic profit for Gomez's pottery firm

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Expert Answer

Step 1

a.

Accounting profit can be calculated as follows:

Accounting profit = revenue – explicit ...

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