Consider the revenues and costs in 2019 for Spruce Decor Inc., an Alberta-based furniture company entirely owned by Mr. Harold Buford.Furniture Sales$ 645 000Catalogue Sales$ 12 000Labour Costs$ 325 000Materials Costs$ 157 000Advertising Costs$ 28 000Debt-Service Costs$ 32 000a. What would accountants determine Spruce Decor’s profits to be in 2019?b. Suppose Mr. Buford has $400 000 of capital invested in Spruce Decor. Also suppose that equally risky enterprises earn a 16 percent annual rate of return on capital. What is the opportunity cost for Mr. Buford’s capital?c. What are the economic profits for Spruce Decor in 2019?d. If Spruce Decor’s economic profits were typical of furniture makers in 2019, what would you expect to happen in this industry? Explain.
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