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Calculate the accounting profit for comets pottery firm

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Reference no: EM131167007

Gomez runs a small pottery firm. He hires one helper at $10,000 per year, pays annual rent of $4,000 for his shop, and spends $16,000 per year on materials. He has $40,000 of his own funds invested in equipment (pottery wheels, kilns, and so forth) that could earn him $4,000 per year if alternatively invested. He has been offered $18,000 per year to work as a potter for a competitor. He estimates his entrepreneurial talents are worth $2,000 per year. Total annual revenue from pottery sales is $65,000.

a. Calculate the accounting profit for Comets pottery firm.

b. Now calculate Comets economic profit.

Reference no: EM131167007

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