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The cost of investing in a new factory is an explicit cost, but the loss of interest is an implicit cost. A business owner may take a pay cut to remain profitable. This loss of earnings for the owner is an implicit cost for business.
We can distinguish between two types of cost: explicit and implicit. Explicit costs are out-of-pocket costs, that is, actual payments. Wages that a firm pays its employees or rent that a firm pays for its office are explicit costs. Implicit costs are more subtle, but just as important.
Explicit Cost is the cost which is actually incurred by the organization, during production. On the other hand, Implicit Cost, are just opposite to the explicit cost, as the organization does not directly incur them, but they are implied in nature which does not involve a cash payment.
Whereas explicit costs are more straightforward, implicit costs deal with intangible costs. An implicit cost represents an opportunity cost. Unlike explicit costs, implicit costs are the costs associated if you would do something, like make an investment.
Implicit costs represent the non-monetary opportunity costs that arise when resources are utilized internally rather than being put to their next best alternative use. On the other hand, explicit costs involve direct monetary payments made by a company for goods or services.
The main difference between the two types of costs is that implicit costs are opportunity costs, while explicit costs are expenses paid with a company's own tangible assets. This...
We can distinguish between two types of cost: explicit and implicit. Explicit costs are out-of-pocket costs, that is, actual payments. Wages that a firm pays its employees or rent that a firm pays for its office are explicit costs. Implicit costs are more subtle, but just as important.
Implicit costs refer to the opportunity costs of using the resources and are considered important while making economic decisions. These costs are not recorded or mentioned in the financial records of the business, like the income statement and balance sheet.
Explicit Costs vs. Implicit Costs . Explicit costs involve tangible assets and monetary transactions and result in real business opportunities. Explicit costs are easy to identify,...
Explicit costs are out-of-pocket costs, that is, actual payments. The wage and rent that a firm pays for office space are explicit costs. Implicit costs are more subtle but just as important. They represent the opportunity cost of using resources that the firm already owns.