Explore BrainMass

Explore BrainMass

    Calculating the accounting and economic costs

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Suppose a company incurs the following costs: Labor - $400, Equipment - $300, Material - $100. However, it owns the building so dosen't have to pay the $800 in rent.

    - What is the tolal accounting cost?
    - What is the total economic cost?
    - Explain why these are different in this way.

    © BrainMass Inc. brainmass.com October 10, 2019, 5:16 am ad1c9bdddf

    Solution Preview

    Let us calculate explicit costs first

    Explicit costs are costs for which actual payments are made.
    Labor Cost = $400
    Equipment = $300
    Material = $100
    Total explicit costs = Labor Cost + Equipment ...

    Solution Summary

    Solution describes the steps to calculate the total accounting and economic costs in the given case.