Which of the Following Is an Explicit Cost in Jim's

question 224

Multiple Choice

Which of the following is an explicit cost in Jim's business venture?

• A) the salary Jim could have earned at another job
• B) the interest Jim does not earn because he invested his savings in his business
• C) the wages Jim pays his workers
• D) Jim's normal profit
• E) Answers A, B, and D are correct.

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Definitions:

Excess Fair Value

The amount by which the fair market value of an asset exceeds its carrying value on the balance sheet.

Franchise Contract

A legal agreement granting a person or group the rights to operate a business under the franchisor's model and brand for a specified period.

Controlling Interest

An ownership interest in an entity that gives the holder the power to direct or influence the management and policies of the entity through ownership of a majority of voting shares.

Deferred Income Tax Liability

A deferred income tax liability is a tax that is assessed or is due for the current period but has not yet been paid, pushing the obligation to future periods.