The following is cost information for the Creamy Crisp Donut Company. Entrepreneur's potential earnings as a salaried worker = $50,000 Annual lease on building = $22,000
Annual revenue from operations = $380,000 Payments to workers = $120,000
Utilities (electricity, water, disposal) costs = $8,000
Value of entrepreneur's talent in the next best entrepreneurial activity = $80,000 Entrepreneur's forgone interest on personal funds used to finance the business = $6,000
Creamy Crisp's economic profit is

Question

Quizplus · Accepted Answer

Creamy Crisp's economic profit can be calculated as:
Revenue - (Payments to workers + Lease on building + Utilities costs + Entrepreneur's forgone interest on personal funds used to finance the business + Value of entrepreneur's talent in the next best entrepreneurial activity) - Entrepreneur's potential earnings as a salaried worker

= $380,000 - ($120,000 + $22,000 + $8,000 + $6,000 + $80,000) - $50,000
= $380,000 - $236,000 - $50,000
= $94,000

Therefore, the economic profit for Creamy Crisp is $94,000. Option D is the correct answer.

The Following Is Cost Information for the Creamy Crisp Donut