Question

Remi owns a small pizza restaurant, where he works full-time in the kitchen. His total revenue last year was $100,000, and his rent was $3,000 per month. He pays his one employee $2,000 per month, and the cost of ingredients and overhead averages $500 per month. Remi could earn $35,000 per year as the manager of a competing pizza restaurant nearby. His total explicit costs last year were:____________.

1. $60,000.
2. $24,000.
3. $66,000.
4. $72,000.
5. $6,000.

Answer 1

3. $66,000.

Step-by-step explanation:

Explicit cost is the total actual cost incurred in carrying out an activity.

Explicit cost = rent + wages + cost of ingredients and overhead

($3,000 × 12) + ($2000×12) +($500 × 12) = $66,000