Anthony Figueroa is a CPA, who works for an accounting consulting firm. His annual salary income is $70,000. Anthony is considering opening up his own consulting firm. He estimates that the annual rent for an office would cost him $20,000; a secretary would cost $24,000 per year. If he would rent office equipment, he would have to pay $11,000 per year. The purchase of required supplies, payment of electricity bills, water and telephone bills, would cost approximately $5,000 a year. Anthony estimates that the revenues that he would generate with consulting services would be $120,000 a year.
a. Calculate Anthony his explicit cost for operating his consulting firm for a year
b. What is Anthony’s accounting cost?
c. What is Anthony’s implicit cost?
d. Should Anthony Figueroa start his own practice? Explain why.