The Exciting Accounting and Economic Costs of Jill's New Business Venture

What do the accounting and economic costs equal?

What are the total accounting and economic costs for Jill's new business?

Answer:

$190,000; $228,000

Explanation:

Accounting Cost:

= Salary of Jill + Labor costs + Insurance and mortgage payment

= $60,000 + $90,000 + $40,000

= $190,000

Economic Cost:

= Accounting Cost + Investment return lost + Loss in Salary + Loss in Rent

= $190,000 + $8,000 + ($80,000 - $60,000) + ($50,000 - $40,000)

= $228,000

Therefore, accounting and economic costs are $190,000 and $228,000, respectively.