On the 1 June,Hazel Ltd commenced business with $10,000 cash and immediately purchased 2000 sprockets for $5 each.On the 30 June it sold all the units for $10.The current cost of the units on 30 June was $5.50.
What would be the profit for Hazel Ltd under the physical capital perspective?
A)$9 000
B)$10
C)$11
D)$12

Question

Quizplus · Accepted Answer

Under the physical capital perspective, profit is calculated based on the actual physical quantity of goods sold and the cost to replace those goods at the current market price. Hazel Ltd started with $10,000, spent $10,000 on sprockets ($5 each for 2000 sprockets), and then sold them for $20,000 ($10 each for 2000 sprockets). The cost to replace these goods at the current market price would be $11,000 ($5.50 each for 2000 sprockets). Therefore, the profit is the sales revenue ($20,000) minus the replacement cost ($11,000), which equals $9,000.

On the 1 June,Hazel Ltd Commenced Business with $10,000 Cash