Question

"Ralph 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. Ralph could earn $35,000 per year as the manager of a competing pizza restaurant nearby. His total explicit costs for the year were:

"
a. $24,000.
b. $6,000.
c. $60,000.
d. $66,000.
e. $72,000.

Answer 1

d. $66,000.

Step-by-step explanation:

(Total explicit cost for the year = total direct costs for the year

Rent $3,000

Employee salary $2,000

Overhead average $500

= (3000 + 2000 + 500)*12 = 5500*12 = $66,000

Therefore Ralph total explicit costs for the year were $66,000