Answer:
Brian
1. Implicit and Explicit Costs:
Implicit costs:
The rental income Brian could receive if he chose to rent out his showroom
The salary Brian could earn if he worked as a financial advisor
Explicit costs:
The wages and utility bills that Brian pays
The wholesale cost for the pianos that Brian pays the manufacturer
2. Brian's accounting and economic profit of his piano business:
Accounting profit = $62,000
Economic profit (loss) = ($3,000)
Explanation:
a) Data and Calculations:
Accounting Profit Economic Profit
Sales Revenue $793,000 $793,000
Cost of pianos 430,000 430,000
Wages and utility bills 301,000 301,000
Implicit (Opportunity) Costs:
Rent 15,000
Salary as an accountant 50,000
Total costs 731,000 796,000
Profit (loss) $62,000 ($3,000)
b) Implicit costs are opportunity costs. They include the costs that arise from forgone benefits when another opportunity is taken instead of the other. Explicit costs are costs that are actually incurred by taking an opportunity.
