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Determine spruce decor profits to be in 2013

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Reference no: EM132478980

Consider the revenues and costs in 2013 for Spruce Decor Inc., an Alberta- based furniture company entirely owned by Mr. Harold Buford.

  • Furniture Sales : $ 645,000
  • Catalogue Sales: $12,000
  • Labour Costs: $325,000
  • Materials Costs: $157,000
  • Advertising Costs: $28,000
  • Debt-Service Costs: $32,000
  1. What would accountants determine Spruce Decor's profits to be in 2013?
  2. Suppose Mr. Buford has $400,000 of capital invested in Spruce Decor. Also suppose that equally risky enterprises earn a 16% annual rate of return on capital. What is the opportunity cost for Mr. Buford's capital?
  3. What are economic profits for Spruce Decor in 2013 ?
  4. If Spruce Decor's economic profits were typical of furniture makers in 2013, what would you expect to happen in this industry? Explain.

Reference no: EM132478980

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