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Consider the revenues and costs in 2019 for Spruce Decor Inc., an Alberta-based furniture company entirely owned by Mr. Harold Buford. Fumiture Sales $600,000 Catalogue Sales $13,500 $345,000 Labour Costs Matorials Costs $162,000 $26,000 Advertising Costs Debt-Service Costs a. What would accountants detormine Spruce Decor's profits to be in 2019? $34,900 Spruce Decor's profits in 2019 equal $ 45600 b. Suppose Mr. Buford has $375,000 of capitai invested in Spruce Decor. Also suppose that equally risky enterprises eam an 18 percent rate of return on capital. What is the opportunity cost for Mr. Buford's capital? The opportunity cost for Mr. Buford's capital is $67500 c. What are the economic profits for Spruce Decor in 2019?

Consider the revenues and costs in 2019 for Spruce Decor Inc., an Alberta-based furniture company entirely owned by Mr. Harold Buford. Fumiture Sales $600,000 Catalogue Sales $13,500 $345,000 Labour Costs Matorials Costs $162,000 $26,000 Advertising Costs Debt-Service Costs a. What would accountants detormine Spruce Decor's profits to be in 2019? $34,900 Spruce Decor's profits in 2019 equal $ 45600 b. Suppose Mr. Buford has $375,000 of capitai invested in Spruce Decor. Also suppose that equally risky enterprises eam an 18 percent rate of return on capital. What is the opportunity cost for Mr. Buford's capital? The opportunity cost for Mr. Buford's capital is $67500 c. What are the economic profits for Spruce Decor in 2019?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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d. If Spruce Decor's economic profits were typical of furniture makers in 2019, what would you expect to happen in this industry? Explain. OA. Exit would occur because economic profit is less than accounting profit. OB. Exit would occur because economic profits are negative. OC. Exit would occur because economic costs exceed accounting costs. OD. Entry would occur because economic profits are negative.
Transcribed Image Text:d. If Spruce Decor's economic profits were typical of furniture makers in 2019, what would you expect to happen in this industry? Explain. OA. Exit would occur because economic profit is less than accounting profit. OB. Exit would occur because economic profits are negative. OC. Exit would occur because economic costs exceed accounting costs. OD. Entry would occur because economic profits are negative.
Consider the revenues and costs in 2019 for Spruce Decor Inc., an Alberta-based furniture company entirely owned by Mr. Harold Buford. Furniture Sales $600,000 Catalogue Salos Labour Costs $13,500 $345,000 $162,000 Materials Costs Advertising Costs Debt-Service Costs $26,000 $34,900 a. What would accountants detormine Spruce Decor's profits to be in 2019? Spruce Decor's profits in 2019 equal $ 45600 b. Suppose Mr. Buford has $375,000 of capital invested in Spruce Decor. Also suppose that oqually risky enterprises ean an 18 percent rate of return on capital. What is the opportunity cost for Mr. Buford's capital? The opportunity cost for Mr. Buford's capital is $ 67500 c. What are the economic profits for Spruce Decor in 2019?
Transcribed Image Text:Consider the revenues and costs in 2019 for Spruce Decor Inc., an Alberta-based furniture company entirely owned by Mr. Harold Buford. Furniture Sales $600,000 Catalogue Salos Labour Costs $13,500 $345,000 $162,000 Materials Costs Advertising Costs Debt-Service Costs $26,000 $34,900 a. What would accountants detormine Spruce Decor's profits to be in 2019? Spruce Decor's profits in 2019 equal $ 45600 b. Suppose Mr. Buford has $375,000 of capital invested in Spruce Decor. Also suppose that oqually risky enterprises ean an 18 percent rate of return on capital. What is the opportunity cost for Mr. Buford's capital? The opportunity cost for Mr. Buford's capital is $ 67500 c. What are the economic profits for Spruce Decor in 2019?
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