Darrell Is the Owner of a Furniture Store

question 60

Multiple Choice

Darrell is the owner of a furniture store.Last year,his total revenue was $525,000 and his total labor costs were $200,000.His overhead expenses,including insurance and legal fees,were $175,000.The rent on his building was $45,000.Darrell could earn $105,000 per year working at a nearby furniture distributor.From this information,we know that his accountant,who does not consider implicit costs,would tell him that profit was:

• A) $525,000.
• B) $375,000.
• C) $150,000.
• D) $175,000.
• E) $105,000.

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Definitions:

Cost-Cutting Project

An initiative aimed at reducing expenses in order to improve profitability.

Reduction in Costs

Efforts or strategies implemented to decrease expenses and improve efficiency in a business operation.

Sunk Cost

A cost that has already been incurred and cannot be recovered, which should not influence future business decisions.

Stand-Alone Principle

An evaluation method in project management and capital budgeting where a project is assessed on its own merits without considering the company's overall financial position.