Problem
Wages P25,000
Interest paid on loans 3,000
Other expenditures for inputs 31,000
Total Revenue 90,000
Katso's Pet Salon hires you to determine the company's status. The data above provides information on the company's annual costs and revenues. Katso spends at least 40 hours a week at her place of business. If she closed the salon, she could work for her competitor and earn P15, 000 per year. She also owns the building that houses the salon and could rent it out for P18, 000 per year if she closes her business. Calculate the economic cost and economic profit for Katso's Pet Salon. Would an accountant come to the same conclusion about the profitability of this firm? Explain.