Question

After firing cashiers to install touchscreens for patrons to place orders, Taco Casa determined that their average cost per touchscreen order was $0.65. After determining that the average compensation cost per human mediated order was $0.60 per order, they revert back to human order takers. Then why did the realized average cost per order with humans come in at $0.70?

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All of the following costs are included in the calculation of accounting profit, except

a. Depreciation expenses related to investments in buildings and equipment

b. Costs paid to suppliers for product ingredients

c. Interest payments on borrowed funds

d. Opportunity cost of capital

Answer 1

Compensation costs shows the employee cost but does not contain all of them as it have various hidden cost such as when unsatisfied employees can have arguments with customers which will reduce order time, or when employees damage the property and steal the machines and other equipments all of which will increase the cost to replace them or when the employees get injured and sick which increases total cost so average cost in this case would rise.

The accounting profit does not contain the opportunity cost of capital as it only contains the explicit costs and not the implicit costs.

Option(D)