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7 March, 22:32

Jane makes 1000 items a day. Each day she spends 8 hours producing those items. If hired elsewhere she could have earned $250 an hour. The item sells for $15 each. Production occurs seven days a week. If the explicit costs total $150,000 per month, what is her accounting profit? a. $300,000 b. $240,000 c. $60,000 d. $450,000

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  1. 7 March, 22:37
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    The correct answer is A.

    Explanation:

    Giving the following information:

    Jane makes 1000 items a day. Each day she spends 8 hours producing those items. If hired elsewhere she could have earned $250 an hour. The item sells for $15 each. Production occurs seven days a week. If the explicit costs total $150,000 per month.

    First, we need to calculate her actual profit. Then, we compare it to the hypothetical income in another job.

    Actual income = Total revenue - total costs

    Total production = 1,000*30 = 30,000

    Actual income = 30,000*15 - 150,000 = $300,000

    Now, assuming that the other job is also 7 days a week:

    Hypothetical income = 250*8*30 = $60,000

    It is considerably more profitable her actual profession.

    The accounting profit doesn't consider the opportunity cost of the other job.
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