Explicit cost

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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.

[edit] See also

• Implicit cost
• Economic profit
• Cost accounting

Explicit cost are those which the entrepreneur has to pay from his own pocket.

Explicit Costs require an outlay of money by the firm.

[edit] Implicit Costs, Explicit Costs, and Total Costs

Impicit Cost + Explicit Cost = Total Cost. Implicit cost is NOT equal to total cost, but a component of it. A simple example: Sean builds a cabinet. He spends 2 hours building the cabinet. He could have been working instead and normally makes $25/hour at his job. Since he was building a cabinet he wasn't paid for this time. The materials to make the cabinet cost him $20.

• His Explicit Costs are: $20 in materials
• His Implicit Costs are: $25/hr x 2 hrs= $50 of foregone pay
• His Total Costs are: $20 in materials + $50 of foregone pay = $70 Total Costs