Walter used to work as a high school teacher for $40,000 per year but quit in order to start his own painting business. To inves

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Walter used to work as a high school teacher for $40,000 per year but quit in order to start his own painting business. To inves

t in his painting business, he withdrew $20,000 from his savings, which paid 3 percent interest, and borrowed $30,000 from his uncle, whom he pays 3 percent interest per year. Last year Walter paid $25,000 for supplies and had revenue of $60,000. Walter asked Tyler the accountant and Greg the economist to calculate his painting business’s costs.

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2 answers:

Mariulka [3.8K] · Answer 1 · 2026-04-11T01:20:56+03:00

The explicit costs, detailed as follows. Walter's spending on supplies totals $25,000; this constitutes part of accounting cost. Additionally, he pays 3% interest on the $30,000 loan, calculated as $900. Therefore, total accounting costs according to Tyler the accountant reach $25,900. In contrast, according to economist Greg, explicit costs amount to $25,900, and implicit costs consider the income Walter forgoes while working as a teacher at $40,000 annually, in addition to interest from savings at $600. Consequently, the Economic cost as per Greg totals = Explicit cost + Implicit Cost = 25,900 + 40,000 + 600 = 66,500.

Scilla [3.8K] · Answer 2 · 2026-04-11T01:22:04+03:00

Tyler's assessment of costs is $25,900 while Greg estimates the costs at $66,500. Explanation: TYLER'S COST - According to accountant Tyler, Walters’ recorded expenses for the painting venture include supplies and interest on the loan to his uncle. The calculations yield Accounting cost = $25,000 + $30,000 x 3% = $25,000 + $900 = $25,900. COST AS PER GREG - Greg's economic cost comprises both explicit and implicit costs. Explicit cost totals $25,900, while implicit costs take into account the potential earnings from teaching and interest that Walter would have gained from his savings account. Therefore, Economic cost = $25,900 + $40,000 + $20,000 x 3% = $25,900 + $40,000 + $600 = $66,500.