Calculate the accounting profit and the economic profit

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Reference no: EM13771427

Gomez runs a small pottery firm. He hires one helper at $18,000 per year, pays annual rent of $8,000 for his shop, and spends $24,000 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 $7,000 per year if alternatively invested. He has been offered $20,000 per year to work as a potter for a competitor. He estimates his entrepreneurial talents are worth $4,000 per year. Total annual revenue from pottery sales is $85,000. Calculate the accounting profit and the economic profit for Gomez’s pottery firm. What is the economic profit?

Reference no: EM13771427

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Calculate the accounting profit and the economic profit : Gomez runs a small pottery firm. He hires one helper at $18,000 per year, pays annual rent of $8,000 for his shop, and spends $24,000 per year on materials. He has $40,000 of his own funds invested in equipment (pottery wheels, kilns, and so forth) t..

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