ECNM 592 Ashworth Question Bank 2: Costs Fall Points

ECNM 592 Ashworth Question Bank 2: Costs Fall pts Multiple Choice Questions 1. (2 pts) A business owner makes 1,000 items a day. Each day she contributes eight hours to produce those items. If hired elsewhere she could have earned $250 an hour. The item sells for $15 each. Production does not stop during weekends. If the explicit costs total $150,000 for 30 days, the firm’s accounting profit for the month equals A. $300,000. B. $60,000. C. $450,000. D. $240,000. 1.

Identify the core assignment question: Calculate the firm's accounting profit for the month based on given production, labor costs, and explicit costs.

Paper For Above instruction

In analyzing the financial performance of a business, understanding accounting profit is fundamental. The scenario describes a business owner producing 1,000 items daily over a month, with direct labor contributing eight hours each day and explicit costs totaling $150,000 for 30 days. The primary goal is to compute the accounting profit using this information.

First, determine the total revenue generated in the month. With each item selling for $15, and 1,000 items produced daily over 30 days, total sales amount to:

  • Number of units per day = 1,000
  • Number of days = 30
  • Total units sold in a month = 1,000 x 30 = 30,000 units
  • Total revenue = 30,000 units x $15 per unit = $450,000

Next, identify the explicit costs. The problem states these costs are $150,000 over the 30-day period, encompassing expenses such as raw materials, wages, utilities, and other direct costs.

To find the accounting profit, subtract the explicit costs from the total revenue:

Accounting Profit = Total Revenue - Explicit Costs = $450,000 - $150,000 = $300,000

Therefore, the correct answer is A. $300,000.

This calculation assumes that the costs provided are all explicit costs and do not include any implicit costs or opportunity costs. It reflects the traditional measure of profit used in financial accounting, which does not account for the owner’s potential earnings elsewhere or other implicit costs.

References

  • Williamson, O. E. (1985). The Economic Institutions of Capitalism. Free Press.
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  • Ross, S. A., Westerfield, R. W., & Jaffe, J. (2013). Corporate Finance. McGraw-Hill Education.
  • Brigham, E. F., & Ehrhardt, M. C. (2016). Financial Management: Theory & Practice. Cengage Learning.
  • Frank, R., & Bernanke, B. (2013). Principles of Economics. McGraw-Hill Education.
  • Haley, E. (2014). Managerial Accounting. Pearson.
  • Cain, M., & Dutta, S. (2012). Business Finance. Pearson.
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  • Scholes, M. S., et al. (2014). Financial Markets and Institutions. Pearson.
  • Besley, T. (2007). Principles of Economics. Oxford University Press.

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