Consider the revenues and costs in 2019 for Spruce Decor Inc., an Alberta-based furniture company entirely owned by Mr. Harold Buford. Furniture Sales Catalogue Sales Labour Costs Materials Costs Advertising Costs Debt-Service Costs $645,000 $16,500 $325,000 $153,000 $28,000 $34,900 a. What would accountants determine Spruce Decor's profits to be in 2019? Spruce Decor's profits in 2019 equal $ b. Suppose Mr. Buford has $400,000 of capital invested in Spruce Decor Also suppose that equally risky enterprises earn 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 $ c. What are the economic profits for Spruce Decor in 2019? The economic profits for Spruce Decor in 2019 equal $ 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 profits are positive OB. Exit would occur because economic profit is less than accounting profit. OC. Exit would occur because economic costs exceed accounting costs.

Consider the revenues and costs in 2019 for Spruce Decor Inc., an Alberta-based furniture company entirely owned by Mr. Harold Buford. Furniture Sales Catalogue Sales Labour Costs Materials Costs Advertising Costs Debt-Service Costs $645,000 $16,500 $325,000 $153,000 $28,000 $34,900 a. What would accountants determine Spruce Decor's profits to be in 2019? Spruce Decor's profits in 2019 equal $ b. Suppose Mr. Buford has $400,000 of capital invested in Spruce Decor Also suppose that equally risky enterprises earn 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 $ c. What are the economic profits for Spruce Decor in 2019? The economic profits for Spruce Decor in 2019 equal $ 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 profits are positive OB. Exit would occur because economic profit is less than accounting profit. OC. Exit would occur because economic costs exceed accounting costs.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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