Question

A young chef is considering opening his own sushi bar. To do so, he would have to quit his current job, which pays $30,000 a year, and take over a restaurant space that he owns and currently rents to his brother for $24,000 a year. His expenses at the sushi bar would be $50,000 for food and $2,000 for gas and electricity. What are his explicit costs?

Answer 1

$106,000

Explanation:

The computation of explicit costs is shown below:-

Implicit costs = Paid amount in a year + Rent amount

= $30,000 + $24,000

= $54,000

Explicit costs = Expenses amount for food + Expenses amount for gas and electricity

= $50,000 + $2,000

= $52,000

Total amount = Implicit costs + Explicit costs

= $54,000 + $52,000

= $106,000

Therefore we have applied the above formula.