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Walter used to work as a high school teacher for $40,000 per year but quit in order to start his own painting business. To invest in his painting business, he withdrew $20,000 from his savings, which paid 3 percent interest, and borrowed $30,000 from his uncle, whom he pays 3 percent interest per year. Last year Walter paid $25,000 for supplies and had revenue of $60,000. Walter asked Tyler the accountant and Greg the economist to calculate his painting business’s costs.a. Tyler says his costs are $25,900, and Greg says his costs are $66,500.
b. Tyler says his costs are $25,000, and Greg says his costs are $65,000.
c. Tyler says his costs are $66,500, and Greg says his costs are $66,500.
d. Tyler says his costs are $75,000, and Greg says his costs are $41,500.

Respuesta :

eugeniawatanabe

Answer:

a. Tyler says his costs are $25,900, and Greg says his costs are $66,500.

Explanation:

Tyler the accountant will only consider the explicit costs, wicth are those that involve direct payments. In this case: The liability with the uncle and the supplies purchased.  

Explicit costs = (Interest paid) + (supplies purchased)

Explicit costs =  (30,000 * 0.03) + (25,000)

Explicit costs = 900 + 25,000

Explicit costs = 25,900

Greg the economist will also consider the implicit cost, which is an opportunity cost. This is the benefit of the most valuable choice out of those that were not taken.

Implicit costs = Salary as teacher + Interests earned by savings

Implicit costs = 40,000 + (20,000 * 0.03)

Implicit costs = 40,000 + 600

Implicit costs = 40,600

Total cost acording to Greg = Explicit cost +  Implicit cost

Total cost acording to Greg = 25,900 + 40,600

Total cost acording to Greg = 66,500

Answer: Thank you so much! I agree

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