Introduction The profit-making of an organization is largely dependent on two major factors, which are cost and revenue. The cost degree relative to the revenue establishes the overall firm profitability. To optimize its profits, a firm needs to generate more revenue while limiting its expenditure (Woolridge & Gray, 2006). While market conditions affect the level of revenue generated to a large extent, costs can be minimized by using the lowest output costs combination, improving organizational efficiency, or enhancing factor productivity. However, it’s important to note that output is directly dependent on the costs incurred by the firm. Background information Producers pay the production factors for the production services they provide. Such expenses incurred on the production factors constitute the cost of production. Various forces affect the pricing of products. However, they broadly fall under two categories, which are demand and supply (Woolridge & Gray, 2006). In the case of Lemonade stand, pricing is based on perceived demand, which is largely reliant on the weather. Weather controls the people who feel the need to have the Lemonade drink. However, the cost of producing a unit of Lemonade determines the Benchmark price beyond which the business will not be viable. Explicit versus implicit costs However, another important for as much as a business may generate profit; it may be important to evaluate whether it was investing the capital and time in the business at the expense of other opportunities that could have existed. Business situation analysis goes beyond financial statement analysis only (Buchanan, 2008). Economic analysis of business analysis also goes a long way in establishing a strong foundation for making decisions. The economic analysis incorporates implicit costs as well as explicit costs, which help a lot in business decision-making. Among essential concepts of economics is that the value associated with an item is actually precisely what an individual has to surrender to be able to obtain if one is tired of doing his regular job, which pays an annual salary of $500, and opts to run the lemonade business stand. He has to give up the accounting job and hence gives up his accounting job income. This is the opportunity cost he loses the accounting job in order to run the lemonade stand. Two types of costs emerge in such a situation explicit costs and implicit costs. Explicit costs are incurred in terms of the cost of setting up the business, while implicit costs do not require any cash outlay, i.e., the income that could have been earned while working at the accounting firm (Buchanan, 2008). Explicit costs define the entire cost incurred in establishing and operating the business. The opportunity cost of the lemonade stand is provided in the simplest kind. Whilst this particular specific description associated with expense may be the favored benchmark for economists within expounding on cost, not every expense in decision-generating circumstances tend to be entirely apparent; one particular expertise of an excellent administrator may be the capability to discover concealed costs (Buchanan, 2008). Typically, the accountants are principally relate