What is the difference between Implicit Cost and Explicit Cost?

When you say explicit costs, you are referring to things that you have spent right from your own pocket. For example, if you need to pay for the rent of your home, you know that this is going to be an explicit cost. When you say implicit cost, on the other hand, you are referring to the opportunity costs that are related to the business.

For example, if an office would need to be expanded into the land and the company owns that land where the office will be expanded and improved, this will be considered as an implicit cost. The explicit cost is normally paid for by the assets that are received by the company because of its products and its operation.

The implicit cost is the cost that occurs on an enterprise but is not reflected or stated as a direct expenditure. It is typically denoted as the deficit from potential revenue. It is a result when the person abandons his ability to gain higher profitability when a company foregoes the satisfaction and benefits that a particular project may produce.

The exact cost, on the other hand, is the cost that solidity reported based on numbers and statistics. The actual price is quite detailed regarding the figures that were generated. It delivers a clear and persistent cash flow from the expense that does not necessarily announce it, and they establish the right from the notion of profitability.

This is the type of cost that is often shown as the quantifiable aspect of the business and pretty much-considered revenue.

These are obviously two types of costs that are meant to be used in different ways. When you say implicit costs, these are known as the opportunity costs. This means that these are costs that are not directly made by the companies but they are usually implied. Take note that the costs for this type of cost may not exactly mean a cash payment.

Explicit cost, on the other hand, is something that the organization would need to pay for due to production. This would require a cash payment. Some people also say that this is also an out of the pocket payment that the company would need to do to produce the items needed by the company.