Answer: a) The rental income Brian could receive if he chose to rent out his showroom - implicit cost
(b) The wages and utility bills that Brian pays - explicit cost
(c) The salary Brian could earn if he worked as a paralegal - implicit cost
(d) The wholesale cost for the boats that Brian pays the manufacturer - explicit cost
Explanation:
Explicit Costs are easy to identify, they are recorded in the financial statements, and are known as accounting costs. It is clearly an outflow of money from a business. Examples are the cost of buying inventory or paying contractors.
Implicit Costs can be the opportunity cost of running a business. In the above question, the salary Brian loses because he is not working as a paralegal is an opportunity cost. So is the rental income Brian could receive if he chose to rent out his showroom
. They are both implicit costs.
Implicit Costs cannot be recorded as accounting costs. Other examples of implicit costs are expenses made in the past such as the cost of Brian's showroom.
