Question

Lauren is the owner of a bakery that earns 0 (zero) economic profit. Last year, her total revenue was $145,000, her rent was $12,000, her labor costs were $65,000, and her overhead expenses were $15,000. From this information, we know that her total explicit costs were:

a. $92,000.
b. $53,000.
c. $80,000.
d. $15,000.
e. $77,000.

Answer 1

Answer: The correct answer is " a. $92,000.".

Explanation: The explicit costs are observable, that is, those that we can easily take into account and decrease our operating result (salaries paid to employees, material costs, taxes, etc.)

So her total explicit cost were: $12 000 + $65 000 + $15 000 = $92 000.