The following is cost information for the Creamy Crisp Donut Company: Entreprene
ID: 411503 • Letter: T
Question
The following is cost information for the Creamy Crisp Donut Company: Entrepreneur's potential earnings as a salaried worker = $50,000 Annual lease on building $22,000 Annual revenue from operations - $380,000 Payments to workers $120,000 utilities (electricity, water, disposal) costs-$8,000 Value of entrepreneur's talent in the next best entrepreneurial activity $80,000 Entrepreneur's forgone interest on personal funds used to finance the business = $6,000 Refer to the above data. Creamy Crisp's total economic costs are: O $286,000 O $150,000. O $94,000. O $156,000.Explanation / Answer
Creamy Crisp's explicit costs = annual lease on building + payment to workers + utilities cost
= 22000 + 120000 + 8000
= 150000
Creamy Crisp's implicit costs including the normal profit = Entrepreneurs potential earnings as a salaried worker + value of entrepreneurs talent in the next next entrepreneurial activity + entrepreneurs foregone interest on personal funds used to finance the business
= 50000 + 80000 + 6000
= 136000
Creamy Crisp's total economic costs = explicit costs + implicit costs including normal profit
= 150000 + 136000
= 286000
ANSWER : $ 286,000
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