The Following Is Cost Information for the Creamy Crisp Donut

question 260

Multiple Choice

The following is cost information for the Creamy Crisp Donut Company.Entrepreneur's potential earnings as a salaried worker = $50,000Annual lease on building = $22,000Annual revenue from operations = $380,000Payments to workers = $120,000Utilities (electricity, water, disposal) costs = $8,000Value of entrepreneur's talent in the next best entrepreneurial activity = $80,000Entrepreneur's forgone interest on personal funds used to finance the business = $6,000Creamy Crisp Donut Company

• A)has lower explicit costs, than implicit costs.
• B)is earning a normal profit but not an economic profit.
• C)is earning an economic profit.
• D)is suffering an economic loss, when implicit costs are considered.

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Distinguish between observation and inference in communication to avoid confusion and misunderstandings.

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Understand the relationship between net income and various financial metrics.

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Definitions:

Indirect Quote

A foreign exchange rate quoted as the domestic currency per unit of the foreign currency.

Journal Entry

A record in the accounting ledger that represents a single financial transaction, showing debit and credit accounts affected.

Call Option

A financial contract giving the buyer the right, but not the obligation, to purchase an asset at a specified price within a certain time period.

Spot Exchange Rates

The current exchange rate at which a currency can be bought or sold for immediate delivery.