Reference no: EM132817531
Imagine that two years after your college degree your annual salary as an assistant store manager is P150,000 per annum, you own a residential building that rents for P60,000 yearly, and your financial assets generate P15,000 per year in interest. On New Year's Day, you decided to be your own boss, evict your tenants, and use your financial assets to establish a pork & chicken grill.
At the end of the year, your books tell the following story.
Total Sales Revenue P 1,300,000
Cost of Sales 910,000
Employee wages 120,000
Utilities 12,000
Taxes 5,000
Advertising expenses 20,000
Total (Explicit) Costs 1,067,000
Net (Accounting) Profit P 233,000
"Hold just a moment," you say. You forgot to subtract my implicit costs. Being in this business caused me to lose as income:
Salary P( 280,000)
Rent ( 10,000)
Interest ( 3,000)
Total Implicit costs ( 41,000)
Problem 1: Give a comparative computation for economic profit and accounting profit.