Answer to Question #268359 in Microeconomics for Kuzi

Question

Walter builds birdhouses. He spends $5 on the materials for each birdhouse. He can build one in 30 minutes. He is semi-retired but earns $8 per hour at the local hardware store. He can sell a birdhouse for $20 each. An accountant would calculate the total cost for one birdhouse to be

A. $5

B. $8

C. $9

D. $13

Answer 1

A. $5

Explanation

In accounting, total cost is total amount expenditure incurred in producing an output. In this case, the only expenditure incurred in producing birdhouse is the purchase of materials for the birdhouse. As such, total cost for one birdhouse in the accounting perspective would be $5.