What Is Explicit Cost? Meaning And Definition

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What Is Explicit Cost?

Have you ever wondered about the easily calculated profit of the company? Or do you know What Is Explicit Cost? How a company can calculate its business costs as well as profits. Well, here we will discuss What Is Explicit Cost? As well as explicit cost definition and What is explicit revenue? With Examples of explicit cost and Examples of implicit cost as well.

So, let us start with What Is Explicit Cost? And its definition.

An explicit cost is basically a typical business cost that is shown in the general ledger and also has a straight affect on the profitability of a company. So, they are denoted to be business operating costs, or expenses, which are easily computable and recognizable.

For example, explicit cost includes employee wages, or say salaries, raw materials, or even lease payments, inputs, utility bills, and rent, and other such things.

The explicit costs are also referred to as actual cost or even accounting costs as it takes into account the cost that is incurred by the firm or a company.

  • Key Points On Explicit Cost:

Some of the common features of explicit cost are as:

  • Thus, explicit cost relates to the operating operations of a company or a business.
  • An explicit cost is shown in the general ledger of the company.
  • They are normal business expenses occurred in a business.
  • Explicit cost is necessary for the calculation of profits.
  • Long-term strategic planning is also possible by calculation of explicit cost.
  • Explicit cost can be depicted in monetary terms.


  • The Formula For Explicit Cost:

The Formula for Explicit cost can be stated as:

  • Explicit costs = cash outflows from the company’s financial statement

 

  • Definition Explicit Cost:

The explicit cost definition can be stated as cash expenditures that are incurred by a company and cover up typical business costs that have a straight affect on the profitability of a company.

  • What Is Explicit Revenue?

Explicit revenue depicts the total profit incurred after subtracting the explicit expenses from it. So, explicit revenue is profit or gain by the company that can be easily determined and recognized.

  • Examples Of Explicit Cost

Here we present some common examples of explicit costs which are also helpful for the calculation of accounting profit:

  • Rent
  • Utilities
  • Payroll
  • employee wages or
  • cost of benefits which are provided to employees
  • salaries
  • lease payments
  • Equipment
  • Supplies
  • Raw materials
  • Inventory
  • raw materials
  • Mortgage
  • Advertising or say advertising costs
  • insurance

 

  • Examples Of Implicit Cost

Here we present some of the common examples of implicit cost are:

  • Opportunity Costs
  • Office supplies
  • The time that is spent on training a new employee
  • Cost of capital
  • Utility payments

Frequently Asked Questions related to What is explicit cost:

  • What Is Explicit And Implicit Cost?

An explicit cost is basically a typical business cost that is shown in the general ledger and also has a straight affect on the profitability of a company. So, they are denoted to be business operating costs, or expenses, which are easily computable and recognizable. The explicit costs are also referred to as actual cost or even accounting costs as it takes into account the cost that is incurred by the firm or a company. Whereas, Implicit cost is the cost that cannot be measured in accounting terms and thus referred to as the opportunity costs for a company. 

  • What Is An Example Of An Implicit Cost?

Some of the common examples of implicit cost are:

  • Opportunity Costs
  • Office supplies
  • The time that is spent on training a new employee
  • Cost of capital
  • Utility payments


  • What Is Explicit Revenue?

Explicit revenue depicts the total profit incurred after subtracting the explicit expenses from it. So, explicit revenue is profit or gain by the company that can be easily determined and recognized.

Conclusion:

Thus, by now we know What Is Explicit Cost? As well as explicit cost definition and What is explicit revenue? With Examples of explicit cost and Examples of implicit cost as well. An explicit cost is basically a typical business cost that is shown in the general ledger and also has a straight affect on the profitability of a company. So, they are denoted to be business operating costs, or expenses, which are easily computable and recognizable. The explicit costs are also referred to as actual cost or even accounting costs as it takes into account the cost that is incurred by the firm or a company. So, What Is Explicit Cost? Is understood well. 

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