Economic Profit vs. Accounting Profit

An entrepreneur starts a consulting business. In the first year, the business generates $150,000 in total revenue. The direct operational expenses for the year are $40,000 for office rent, $60,000 for employee salaries, and $10,000 for supplies. To start this business, the entrepreneur gave up a previous job that paid an annual salary of $70,000. Based on this information, what is the business's accounting profit for the year?

Assessing Business Performance

Calculating a Cafe's Profitability

Calculating a Bakery's Accounting Profit

To calculate a firm's accounting profit for a specific period, one must subtract the cost of materials, employee wages, and the potential interest the owner could have earned by investing their capital elsewhere from the total sales revenue.

A small business owner is calculating their firm's accounting profit for the year. Match each financial item below to its correct classification for this specific calculation.

A freelance graphic designer earned a total revenue of $80,000 last year. Their business expenses included $2,000 for software subscriptions, $1,000 for office supplies, and $3,000 for marketing. To pursue this freelance career, the designer turned down a full-time job offer with a salary of $65,000. The designer's accounting profit for the year was $____.

A business owner wants to calculate their firm's accounting profit for the last quarter. Arrange the following steps into the correct logical sequence they should follow.

A small manufacturing company is assessing its performance for the past year. The owner has compiled the following financial data:

• Total revenue from sales: $200,000
• Wages paid to employees: $50,000
• Cost of raw materials: $30,000
• Annual rent for the factory: $24,000
• Interest the owner could have earned by investing their capital elsewhere: $10,000
• Salary the owner could have earned working for another company: $60,000

Which of the following calculations correctly represents the company's accounting profit for the year?

Interpreting Profit Figures