Question

Ellie has been working for an engineering firm and earning an annual salary of $80,000. She decides to open her own engineering business. Her annual expenses will include $15,000 for office rent, $3,000 for equipment rental, $1,000 for supplies, $1,200 for utilities, and a $35,000 salary for a secretary/bookkeeper. Ellie will cover her start-up expenses by cashing in a $20,000 certificate of deposit on which she was earning annual interest of $500.

Ellie's annual implicit costs will equala. $55,200.b. $75,200.c. $80,500.d. $165,700.

Answer 1

c. $80,500

Step-by-step explanation:

The computation of the implicit cost is shown below:

Implicit cost = Annual salary earned + annual interest earned on certificate of deposit

= $80,000 + $500

= $80,500

We simply added the annual salary earned and annual interest earned i.e income that is foregone so that the implicit cost could arrive

All other information which is mentioned in the question is not relevant. Hence, ignored it