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joan quit her job as a home health aide earning $50,000 per year to start her own business. to save money she operates her business out of a small building she owns which, until she started her own business, she had rented out for $10,000 per year. she also invested her $20,000 savings (which earned a market interest rate of 5% per year) in her business. you are given the following information about the first year of her operations. total revenue $120,000.00 cost of labor $40,000.00 cost of materials $20,000.00 equipment rental $5,000.00 calculate her explicit (accounting) costs. $



Answer :

Total explicit costs is $76,000 according to the given data.

Explicit (accounting) costs:

Rent: $10,000

Interest on savings: $1,000 (5% of $20,000 savings)

Labour: $40,000

Materials: $20,000

Equipment rental: $5,000

Total explicit costs: $76,000

Explicit costs are regular business expenses that are recorded in the general ledger of a firm and have a direct impact on its profitability. They have specific monetary values that are carried over to the income statement. Wages, leasing payments, utilities, raw materials, and other direct costs are a few examples of explicit costs.

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