Sam quits his job as an airline pilot and opens his own pilot training school. He was earning $40,000 as a pilot. He withdraws $10,000 from his savings where he was earning 6 percent interest and uses the money in his new business. He uses a building he owns as a hangar that he could have rented out for $5,000 per year. He rents a computer for $1,200,buys office supplies for $500, rents an airplane for $6,000, pays $1,300 for fuel and maintenance, and hires one worker for $30,000. Sam's total revenue from pilot training classes this year equaled $90,400. Sam's explicit costs this year equal
A) $84,400
B) $39,000
C) $55,000
D) $45,600
E) $40,000

Question

Quizplus · Accepted Answer

Explicit costs are the direct, out-of-pocket payments for expenses. Sam's explicit costs include renting a computer ($1,200), buying office supplies ($500), renting an airplane ($6,000), paying for fuel and maintenance ($1,300), and hiring a worker ($30,000). Adding these together gives $1,200 + $500 + $6,000 + $1,300 + $30,000 = $39,000.

Sam Quits His Job as an Airline Pilot and Opens