Question

A local coffee shop is hoping to make use of its excess restaurant capacity in the evenings by experimenting with selling beer and wine. It speculates that the only additional costs are hiring more of the same sort of workers to cover the additional hours and costs of the new line of beverages.
Which of the following are examples of hidden costs that are likely to emerge from this decision?
A. The cost of landscaping for the outside lawn
B. The forgone revenues that could be earned by renting the coffee shop out for other events during evening hours
C. The cost of purchasing wine and beer to serve to customers
D. The costs involved with the increased usage of utilities, such as electricity and gas, during evening hours
E. Training costs for new and existing employees on beer and wine serving procedures

Answer 1

Answer:

-The forgone revenues that could be earned by renting the coffee shop out for other events during evening hours

- The costs involved with the increased usage of utilities, such as electricity and gas, during evening hours

- Training costs for new and existing employees on beer and wine serving procedures

Explanation:

Cost such as cost of landscaping the lawn outside and the cost of purchasing wine and beer to serve to customers are costs that tend to be incurred from operating the coffee shop, regardless of whether the beer and wine experiment is undertaken which is why these costs are not among the hidden costs of the coffee shop decision.

Therefore any cost which is not taken into account and which as well varies with the consequences of a decision is what we called HIDDEN COST.

Hence Costs such as increased utility usage due to the increased numbers of hours of operation, forgone revenues of renting out the space of the coffee shop and the costs of training new and existing employees in how to serve beer and wine are all costs that is been incurred due to the decision to extend hours and serve beer and wine.