Question
An entrepreneur has two investment options. One is Factory X who has a product with a selling price of $ 500 and annual sales of
An entrepreneur has two investment options. One is Factory X who has a product with a selling price of $ 500 and annual sales of 6,000 units. Fixed costs are $ 40,000 and variable costs are $ 150,000 (both annually). There is an alternative business, Factory C in which he will have a profit of $ 150,000.
a) What is the accounting profit of Factory X business?
b) What is the economic profit of Factory X business?
c) What do you recommend to the entrepreneur?
Please explain the math as much as possible, obtained a previous answer but doubtful as to how some values were obtained.
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