Krista sets up a business selling coffee from a coffee cart. She earns $12,000 in revenue a month. She incurs $3000 per month in supplies (coffee cups, creamer, sugar, pastries, napkins, and so on). She used to earn $3500 per month as a barista. The coffee cart is very specialized and has no other uses. What are Krista's explicit costs per month

Explicit cost is $3,000

Explanation:

Explicit cost can be defined as direct payments that are made by a business in daily operations. For example wages, purchase, rent and raw materials. They have clear values that are represented in the income statement and are also known as accounting costs.

Explicit cost in combination with revenue is used to calculate net income earned by a business.

Implicit cost on the other hand is when there are no actual payments made.

In this instance the explicit cost incurred is $3000 per month in supplies (coffee cups, creamer, sugar, pastries, napkins, and so on). Her revenue is $12,000.

Her explicit cost is $3000

Explanation:

Explicit costs refers to the actual payments made by the business. They are referred to the actual debits which are placed by the business.

Now, checking the values in the question, we can see that the actual debit made by the business is the costs incurred on those things she uses to make her products. As stated in the question, these includes cost on coffee cups, creamer, sugar, pastries, napkins and so in which exactly is at a value of $3000. This is her explicit cost