Week 2 Discussion Controlling Costs 3

Week 2 Discussion Controlling Costs 3 - Accounting profit...

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Robert, thanks! Maybe this equation will help us in our further discussion in Week 2: Profit = Total Revenue - Total Cost In economics we consider all costs as opportunity costs. Having said that, what is the difference between accounting profit and economic profit? Economic profit is revenues less opportunity costs which will result in a significant accounting profit with little to no economic profit. An economic profit only occurs when a company’s revenue exceeds both implicit costs, such as opportunity costs and explicit costs.
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Unformatted text preview: Accounting profit is revenue less money cost. This would be considered a company’s total earnings and is based on only explicit costs such as taxes and interest. In simple terms, accounting profit only accounts for explicit costs and economic profit includes both explicit and implicit. Sources: http://schumpeter2006.org/blog/2006/12/12/accounting-profit-vs-economic-profit/ http://www.unc.edu/depts/econ/byrns_web/Economicae/Essays/Actg_V_Econ.htm...
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This note was uploaded on 03/26/2012 for the course ECON GM545 taught by Professor Gotches during the Summer '11 term at Keller Graduate School of Management.

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