Question

Tony's parents own a dry cleaning business and Tony helps his family by working on Saturdays. Since Tony is a member of the family he isn't paid, but he does collect tips. In terms of costs, how would the business categorize Tony's labor?

Answer 1

Tony's labor would be categorized as an opportunity cost and the tips he collects would be seen as a form of income. The business would not include Tony's labor as a direct cost, but they would recognize the value of his contributions.

Step-by-step explanation:

In terms of costs, Tony's labor would be categorized as an opportunity cost. Since Tony is a member of the family and is not paid a wage, his labor is considered unpaid or non-market labor. However, the tips Tony collects can be seen as a form of income that is not directly associated with the business. Therefore, the business would not include Tony's labor as a direct cost in their accounting records, but they would recognize the value of his contributions as a benefit.