Ask Question
14 July, 12:38

After graduation, you face a choice. One option is to work for a multinational consulting firm and earn a starting salary (benefits included) of $40,000. The other option is to use $5,000 in saving to start your own consulting firm. You could earn an interest return of 5 percent on your savings. You choose to start your own consulting firm. At the end of the first year, you add up all of your expenses and revenues. Your total includes $12,000 in rent, $1,000 in office supplies, $20,000 for office staff, and $4,000 in telephone expenses. What are your total explicit cost and total implicit costs?

+3
Answers (1)
  1. 14 July, 13:16
    0
    The total explicit cost and total implicit costs is $37,000 and $40,250 respectively.

    Explanation:

    Explicit cost : The explicit cost is that cost which is paid for day to day activities. Like : salaries expense, wages expense, rent, telephone expense, etc.

    Implicit cost : The implicit cost is that cost which is related to the firm's growth. or it can be opportunity cost also.

    So,

    Total Explicit cost = Rent expense + Office supplies + Office staff + Telephone expense

    = $12,000 + $1,000 + $ 20,000 + $ 4,000

    = $37,000

    And Total Implicit cost = Starting Salary + Savings

    = $40,000 + $5,000 * 5%

    = $40,250

    Hence, the total explicit cost and total implicit costs is $37,000 and $40,250 respectively.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “After graduation, you face a choice. One option is to work for a multinational consulting firm and earn a starting salary (benefits ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers