Reference no: EM132814179

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 P 1,300,000
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)

Problem 1: Give a comparative computation for economic profit and accounting profit.