The table below provides the total revenues and costs for a small landscaping company in a recent year. $\begin{array}{|l|l|}\hline \text { Total R evenues (\$) } & 250000 \
\hline & \
\hline \text { Total Costs (\$) } & \
\hline \text { - wages and salaries } & 150000 \
\hline \text { risk- free return of } 2 \% \text { on owner's capital of } \$ 20000 & 400 \
\hline \text { - interest on bank loan } & 1500 \
\hline \text { cost of supplies } & 27000 \
\hline \text { - depreciation of capital equipment } & 8000 \
\hline \text { - additional wages the owner could have earned in next } & 30000 \
\text { best alternative } & \
\hline \text { - risk premium of } 4 \% \text { on owner's capital of } \$ 20000 & 800 \
\hline
\end{array}$ TABLE 7- 2
-Refer to Table 7- 2.The accounting profits for this firm are
A)$63 500.
B)$32 700.
C)$63 100.
D)$32 300.
E)$71 500.

Question

Quizplus · Accepted Answer

Accounting profit is calculated as total revenues minus explicit costs. Explicit costs include wages and salaries, interest on bank loan, cost of supplies, and depreciation. Thus, accounting profit = $250,000 - ($150,000 + $1,500 + $27,000 + $8,000) = $63,500.

The Table Below Provides the Total Revenues and Costs for a Small