Suppose a firm has an annual budget of $150,000 in wages and salaries, $75,000 in materials, $30,000 in new equipment, $20,000 in rented property, and $35,000 in interest costs on capital. The owner-manager does not choose to pay himself, but he could receive income of $90,000 by working elsewhere. The firm earns revenues of $320,000 per year. What are the annual accounting costs for the firm described above?

Question

Business

Dunlap

8 July, 15:19

Suppose a firm has an annual budget of $150,000 in wages and salaries, $75,000 in materials, $30,000 in new equipment, $20,000 in rented property, and $35,000 in interest costs on capital. The owner-manager does not choose to pay himself, but he could receive income of $90,000 by working elsewhere. The firm earns revenues of $320,000 per year. What are the annual accounting costs for the firm described above?

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Answers (1)

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Roselyn Dodson · Answer 1

The annual explicit costs for the firm is $310,000.

Explanation:

Explicit cost refers to the cost of the resources purchased by firm from outsiders.

Calculate the annual explicit cost -

Annual explicit cost = Wages and salaries + Materials + New equipment + rented property + interest cost on capital

Annual explicit cost = $150,000 + $75,000 + $30,000 + $20,000 + $35,000

Annual explicit cost = $310,000

Thus,

The annual explicit costs for the firm is $310,000.