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Considering The Opportunity Cost: Accounting

The document contains three tables showing accounting calculations for revenue, costs, and profit under different scenarios. The first table shows the basic accounting calculations for revenue of $54,000, total costs of $26,800, and profit of $27,200. The second table considers opportunity costs, showing revenue remains $54,000 but total costs increase to $56,800 when a $30,000 opportunity cost is included, resulting in a $2,800 loss. The third table disregards sunk costs, showing revenue again at $54,000 but total costs reduced to $50,800 when a $6,000 sunk cost is excluded, giving a profit of $3,200.

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Benzon Agojo Ondovilla
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63 views6 pages

Considering The Opportunity Cost: Accounting

The document contains three tables showing accounting calculations for revenue, costs, and profit under different scenarios. The first table shows the basic accounting calculations for revenue of $54,000, total costs of $26,800, and profit of $27,200. The second table considers opportunity costs, showing revenue remains $54,000 but total costs increase to $56,800 when a $30,000 opportunity cost is included, resulting in a $2,800 loss. The third table disregards sunk costs, showing revenue again at $54,000 but total costs reduced to $50,800 when a $6,000 sunk cost is excluded, giving a profit of $3,200.

Uploaded by

Benzon Agojo Ondovilla
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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ACCOUNTING

Revenue 1.50 36,000.00 54,000.00


Variable Cost 0.30 36,000.00 10,800.00
Fixed Cost 16,000.00
Total Cost 26,800.00
Profit 27,200.00

ECONOMIC
Considering the Opportunity Cost
Revenue 1.50 36,000.00 54,000.00
Variable Cost 0.30 36,000.00 10,800.00
Fixed Cost 16,000.00
Opportunity Cost (Fixed) 30,000.00
Total Cost 56,800.00
Profit/Loss - 2,800.00

Disregarding the Sunk Cost


Revenue 1.50 36,000.00 54,000.00
Variable Cost 0.30 36,000.00 10,800.00
Fixed Cost 10,000.00 *Sunk cost of $6,000 for the non-
Opportunity Cost (Fixed) 30,000.00
Total Cost 50,800.00
Profit/Loss 3,200.00
*Sunk cost of $6,000 for the non-refundable deposit is subtracted/excluded from the total fixed cost
TABLE 2.1
Revenue, Cost and Profit for Selected Sales Volume of Ice Cream Bars
UNITS REVENUE COST PROFIT AC
0.00 $ - 40,000.00 - 40,000.00 -
10,000.00 $ 15,000.00 43,000.00 - 28,000.00 4.30
20,000.00 $ 30,000.00 46,000.00 - 16,000.00 2.30
30,000.00 $ 45,000.00 49,000.00 - 4,000.00 1.63
40,000.00 $ 60,000.00 52,000.00 8,000.00 1.30
50,000.00 $ 75,000.00 55,000.00 20,000.00 1.10
60,000.00 $ 90,000.00 58,000.00 32,000.00 0.97

Given:
Price per ice cream bar = $1.5
Variable cost per ice vream bar = $0.3
Fixed cost = $40,000
Formula/Function
R = $1.5Q
C = $40,000 + $0.3 Q
π=R−C
AC = C/Q = ($40,000 + $0.3 Q)/Q = $0.3 + $40,000/Q
π P R π C
- 40,000.00 3.3 - - 40,000.00 40,000.00
- 28,000.00 2.8 28,000.00000 - 15,000.00 43,000.00
- 16,000.00 2.3 46,000.00000 - 46,000.00
- 4,000.00 1.8 54,000.00000 5,000.00 49,000.00
8,000.00 1.3 52,000.00000 - 52,000.00
20,000.00 0.8 40,000.00000 - 15,000.00 55,000.00
32,000.00 0.3 18,000.00000 - 40,000.00 58,000.00

Profit function Using Differential Calculus


π=1.2Q-40000 P= 3.3-0.00005Q Mπ= 3-0.0001Q
R= 3.3Q-0.00005Q^2 Mπ=0 0=3-0.0001Q
π= -0.00005Q^2+3Q-40000 0.0001Q=3
Q= 30,000.00
Using R=3.3Q-0.00005Q^2
Q at 36,001 53,999.70 Q at 35,999 54,000.30
Q at 36,000 54,000.00 Q at 36,000 54,000.00
MR= - 0.30 0.30

Using π=-0.00005Q^2+3Q-40000
Q at 36,000 3200
Q at 36,0001 3199.39995
Mπ= -0.60
MC= 0.30
ential Calculus

0=3-0.0001Q *marginal profit at


the quantity with
the highest profit
has a value of zero
P1 P2 P= 3.3-0.00005Q
1.50 2.00 b= rise/run
Q1 Q2 b= P2-P1/Q2-Q1
36,000.00 26,000.00 b= 2-1.5/26000-36000
b= - 0.00005
Inverse Demand Equation
P=a+b(Q) 1.5=a-0.00005(36000)
1.5=a-1.8
P=3.3-0.00005Q 1.5+1.8=a
3.30 a

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