Detailed Answer
Answer (A) is correct. Explicit costs are those requiring actual cash disbursements. For this reason, they are sometimes called out-of-pocket or outlay costs. In Jennilyn’s case, they total $245,000 ($120,000 salaries + $20,000 rent + $9,000 furniture + $9,000 supplies + 80,000 insurance + $7,000 utilities). Implicit costs are those costs not recognized in a concern’s formal accounting records. Implicit costs are opportunity costs, i.e., the maximum benefit forgone by using a scarce resource for a given purpose and not for the next-best alternative. For Jennilyn, these consist of the salary forgone by quitting her job ($40,000) plus the the interest she could have earned by simply investing the inheritance instead of plowing it into the business ($100,000 × 6% = 6,000 )