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
Refer to the data.Creamy Crisp's total revenues exceed its total costs,including a normal profit,by:

Question

Quizplus · Accepted Answer

To calculate if Creamy Crisp's total revenues exceed its total costs including a normal profit, we need to consider all explicit and implicit costs. Explicit costs are direct payments made to others in the course of running a business, such as lease, payments to workers, and utilities. Implicit costs are the opportunity costs of using resources that the firm already owns, such as the entrepreneur's potential earnings, the value of the entrepreneur's talent in the next best activity, and the forgone interest on personal funds. Total costs = Lease + Payments to workers + Utilities + Entrepreneur's potential earnings + Value of entrepreneur's talent + Entrepreneur's forgone interest = $22,000 + $120,000 + $8,000 + $50,000 + $80,000 + $6,000 = $286,000. Total revenues = $380,000. Therefore, revenues exceed total costs by $380,000 - $286,000 = $94,000.

The Following Is Cost Information for the Creamy Crisp Donut