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ABC Manufacturing has an accounting profit of $150,000 and economic profit of $120,000. The company's explicit...

ABC Manufacturing has an accounting profit of $150,000 and economic profit of $120,000. The company's explicit costs are $100,000. What are the implicit costs of this company?

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Answer #1

Implicit cost are the difference between accounting profit and economic profit which is $30000 (150000-120000).

Or in other way-

Accounting profit = Total revenue - explicit cost

Total revenue = Accounting profit + explicit cost

= 150000 + 100000

= 250000

Economic profit = Total revenue - explicit cost - implicit cost

= Implicit cost = total revenue - economic profit - explicit cost

= 250000 - 120000 - 100000

= 30000

So implicit cost = $30000

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