Reference no: EM132787324

Question - Imagine that two years after your college degree your annual salary as an assistant store manager is P280,000 per annum, you own a building that rents for P100,000 yearly, and your financial assets generate P30,000 per year in interest. On New Year's Day, after deciding 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 P1,300,000

Cost of Sales 850,000

Employee wages 200,000

Utilities 50,000

Taxes 50,000

Advertising expenses 100,000

Total (Explicit) Costs 1,250,000

Net (Accounting) Profit P 50,000

"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)

Give a comparative computation for economic profit and accounting profit.