The first type of cost is explicit cost, which are determined from the accounting perspective. Explicit costs represent monetary expenses that the company directly paid for. For example, Wal-Mart paid 6,365,000 for the Income Tax Expense in the fiscal year of January 2007. This amount of money is recorded as a monetary cost in the accounting ledger of the company so it is explicit costs. The other type of cost is implicit cost, which is determined from the economic perspective. Implicit cost represents opportunity costs associated with the resources the company might have used for. For example, Wal-Mart may use part of its area to establish a Pet shop that brings in 10,000 in total revenue annually. Walmart could have used that place to open cellular phone store, which would have had total revenue of $20,000 annually. Wal-Mart total implicit costs are equal to 10,000 annually. This is because when measuring the implicit cost, one looks for the best forgone decision. Wal-Mart’s best decision would have been to open a cellular phone store, because it would have brought them the greatest profits. Firms must all bear both implicit and explicit costs into consideration to make rational business decisions. In the long run, all costs are variable. But in the short run, there are two different types of costs which are fixed costs and variable costs. Variable costs change directly with output. Variable costs are a direct function of production volume, rising whenever production expands and falling whenever it contracts. If the business of Wal-Mart falls dramatically or reaches zero, then layoffs may occur, and the firm would reduce the number of employee to reduce the employee wages expenses which are a variable cost. In contrast, total fixed costs remain regardless of sales volume. For example, the electrical bill Wal-Mart need to pay per month is $ 5,000 in total. The 5,000 is the fixed cost that the company has to pay every month.