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"Production Costs" Please respond to one of the following:
Economic Versus Accounting Costs
Item:
Cost
Total annual labor cost (the business owner does not draw a salary)
$160,000.00
Total annual cost of materials used in production
$250,000.00
Annual expenditure on rent, utilities, taxes, insurance, and misc. expenses
$90,000.00
The business owners' previous annual salary when he worked for someone else
$85,000.00
The business owner's annual interest income before sinking all of his funds into this business
$15,000.00
What is the Accounting Cost of operating this business? What is the Economic Cost? Why do they differ?
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