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What Are Explicit Cost And Implicit Cost?

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تم إضافة السؤال من قبل Rehan Qureshi , Financial Consultant , Self Employeed
تاريخ النشر: 2014/01/21
Rehan Qureshi
من قبل Rehan Qureshi , Financial Consultant , Self Employeed

Explicit cost An Explicit cost is a business expense accounted cost that can be easily identified such as wage, rent and materials. Explicit costs gives clear and evident cash outflows from business that decreases its end result profitability. This cost directly effect the revenue. Intangible expenses such as goodwill and amortization are not explicit expense because these expenses don't show clear effects on a business's revenue and expenses. Implicit cost An implicit cost results if the person who at first foregoes the satisfaction in the search of an activity and is not rewarded by money or another form of payment. The implicit cost begins and ends with foregoing the benefits and satisfaction. When an organization or owner uses its own equity for company's well-air then that cost is considered as implicit cost. Goodwill is a good example of implicit cost. Explicit Cost vs. Implicit Cost Explicit cost can be counted in terms of money whereas implicit cost can not be traded and therefore can not be counted in terms of money.

 

Explicit cost is a direct tangible cost whereas implicit cost is indirect intangible cost.

María Infante Chillón
من قبل María Infante Chillón , Civil Engineer , Arco Studio

Explicit Costs are those for which the companies pay for salaries, services, equipment maintenance, etc

Implicit Costs are the use of the equity capital and resources of the company like assests and the use of money, assets and financial resources of the owner as well. These are: operating costs and administrative costs-

Maged Galal
من قبل Maged Galal , Financial Controller , International Holding Projects Group - IHPG

 

Implicit cost is the opportunity cost & uses for the economic studies, visibility studies a strategic planning to calculate the unreal cost (lost revenue) will accurse when you chose an alternative instead of other. If you have current deal the NP for the it is5$ & have new deal give you15$ & you have to choose one of them if you choose the second you have to take in your consideration the NP of the first deal as Implicit cost so the economic profit for the new deal will be10$ not15$.

 

Explicit cost is the actual spend you pay to get a service.

 

Ahmed Abd Alwahab Awad Ibrahim
من قبل Ahmed Abd Alwahab Awad Ibrahim , Chief Accounting , ICCDP

By explicit simple way

Explicit cost is the cost messuare as per  accounting approaches

but implicit cost is messaure as per  economy approaches (accounting approaches + opportunity cost)

syed waseem Iqbal
من قبل syed waseem Iqbal , Senior Accountant , Pacific Exim (pvt) ltd

IMPLICIT COST :intangible costs that are not easily accounted for.

Explicit Cost: Business expense which is easily identified and accounted for. like wages, rent

suleman anjum
من قبل suleman anjum , Accounts and Finance Executive , Paksolarcells Pvt. ltd

implicit costs A firm's use of its own capital. This is considered an implicit cost because the capital could have been rented to another firm instead. This rental income foregone, or the implicit rental rate of capital, is the firm's opportunity cost of using its own capital. This implicit rental rate can be broken down beyond interest forgone. * A firm's use of its owner's time and/or financial resources. * Economic depreciation.' Explicit cost An Explicit cost is an easy accounted cost, such as wage, rent and materials. It can be transacted in the form of money payment and is lost directly, as opposed to monetary implicit costs. Explicit cost are those which the entrepreneur has to pay from his own pocket. Explicit Costs require an outlay of money by the firm.

mukkur srinivasan varadhan
من قبل mukkur srinivasan varadhan , Chartered Accountant , Chartered Accountant in practice

Explicit cost is one stated expressly and clearly identifiable, whereas implicit cost is there but understandable by implication only.

A job can be done by outside manpower supply or by the deployment of own staff.When the job is completed by outside manpower supply, we will pay as per manpower supply contract . This is explicit cost.

When done with our own staff.It also involves cost implicit in the form salary etc., payable to our staff. This is Implicit Cost.

Aziz ur Rehman ur Rehman
من قبل Aziz ur Rehman ur Rehman , Assistant Manager Finance , Central Power Puchasing Agency (CPPA)

Explicit costs are the expenses made by an industry for all facilities and materials during its running and these include expenditure such as places, wages for the laborers, and cost of raw materials, machinery purchases, advertising and rent.

implicit costs are the costs of the forgone occasions due to business decisions. For example a condition where a business owns a truck which it uses to transport its merchandises.

Mohamed Esam Mohamed Kamel
من قبل Mohamed Esam Mohamed Kamel , Financial Analyst , Egyptian Water & Wastewater Regulatory Agency (EWRA)

Explicit Cost: Expense that is contractual in nature and definite in amount, such as rent, salaries, wages, or utility bills. Explicit costs are easily recognizable for classification and recording.

 

Implicit Cost: The costs associated with an action's tradeoff. It is related to explicit costs, which represent the actual costs of an activity, and represents a cost that is not recorded but instead implied. For example, an employee could take a vacation and travel. The explicit costs would include travel expenses, the cost of a hotel room, and costs related to entertainment. The implicit costs relate to the tradeoff, namely the wages that the employee could have earned if the vacation was not taken.

 

As another example, not paying rent on the self-owned property (called implicit rent) is an implicit cost, because rent is a tax deductible expense but implicit rent is not. Similarly, implicit cost of liquid assets or stockholders' (shareholders') capital is the maximum interest that would be earned on them as a fixed deposit or as an investment in a mutual fund (unit trust). Implicit costs must be added to actual cash outlays to establish a true estimate of the cost of production or of running a business. Also called imputed cost, implied cost, or notional cost.

Khader Basha Shaik
من قبل Khader Basha Shaik , Senior Accountant , REEM AL KHALEEJ PERFUMES EST

Implicit cost are the cost of using your firms resources the ones you already have. Explicit costs are expenses that a firm must make to outsiders for resources. Ex: Wages, materials, cost of raw materials etc.

thank you

Altaf Bhoon ACA
من قبل Altaf Bhoon ACA , Assistant Finance Manager , Atlantic Maritime Group FZE

Implicit cost is a cost that has occurred but it is not initially shown or reported as a separate cost. For example opportunity cost. On the other hand, explicit cost is one that has occurred and is clearly reported as a separate cost. Below are some examples to illustrate the difference between an implicit cost and an explicit cost.

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