Answer:
1. Total implicit cost per year = $66,000
2. Total cost per year = $337,000
Explanation:
Given:
Salary = $60,000
Investment = $100,000
Rent = $75,000
Wages = $190,000
Materials and utilities = $6,000
Rate of return = 6%
Computation:
1. Total implicit cost per year:
Total implicit cost per year = Salary give up + Return on investment
Total implicit cost per year = $60,000 + ($100,000 x 6%)
Total implicit cost per year = $60,000 + $6,000
Total implicit cost per year = $66,000
2. Total cost per year:
Total cost per year = Total implicit cost per year + Rent + Wages + Materials and utilities
Total cost per year = $66,000 + $75,000 + $190,000 + $6,000
Total cost per year = $337,000
