Suppose a firm has an annual budget of $200,000 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 $360,000 per year.What are the annual explicit costs for the firm described above?
A)$450,000.
B)$160,000.
C)$90,000.
D)$360,000.

Question

Quizplus · Accepted Answer

Explicit costs are the direct, out-of-pocket payments for expenses. For this firm, they include wages and salaries ($200,000), materials ($75,000), new equipment ($30,000), rented property ($20,000), and interest costs ($35,000), totaling $360,000.

Suppose a Firm Has an Annual Budget of $200,000 in Wages