Harvey quit his job at State University, where he earned $45,000 a year. He figures his entrepreneurial talent or forgone entrepreneurial income to be $5,000 a year. To start the business, he cashed in $100,000 in bonds that earned 10 percent interest annually to buy a software company, Extreme Gaming. In the first year, the firm sold 11,000 units of software at $75 for each unit. Of the $75 per unit, $55 goes for the costs of production, packaging, marketing, employee wages and benefits, and rent on a building.

The explicit costs of Harvey's firm in the first year were:

A. $50,000B. $60,000C. $100,000D. $150,000

Question

Carley Randolph

Business

24 September, 12:59

Harvey quit his job at State University, where he earned $45,000 a year. He figures his entrepreneurial talent or forgone entrepreneurial income to be $5,000 a year. To start the business, he cashed in $100,000 in bonds that earned 10 percent interest annually to buy a software company, Extreme Gaming. In the first year, the firm sold 11,000 units of software at $75 for each unit. Of the $75 per unit, $55 goes for the costs of production, packaging, marketing, employee wages and benefits, and rent on a building.

The explicit costs of Harvey's firm in the first year were:

A. $50,000B. $60,000C. $100,000D. $150,000

+2

Answers (1)

Know the Answer?

Hadassah Glover · Answer 1

The options are wrong, find below correct multiple choices:

$605,000

$825,000

$655,000

$150,000

The correct option is $605,000

Explanation:

Explicit costs are costs incurred that require actual cash settlement not costs of alternative forgone as in the case of implicit costs.

There is only example of explicit cost for Harvey Business in the first year of operation, which is the cost of production, packaging, marketing, employee wages and benefits and rent on a building.

In other words, the explicit costs incurred in year one = $55*11,000 units

=$605,000

The correct option is the of those ones provided above.