EXPLICIT COST Meaning and
Definition
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Explicit cost, in the field of economics and accounting, refers to the actual out-of-pocket expenses incurred by a firm or an individual when engaging in a specific economic activity. It represents the monetary payments made to obtain resources or assets that are used in production or any other business operation. These costs are easily observable and tangible, and their value is known and quantifiable.
Explicit costs generally encompass various elements, such as wages paid to employees, purchase costs of raw materials or supplies, utility bills, rent or lease payments for facilities, insurance premiums, advertising expenses, taxes, interest charges on borrowed capital or debt, fees for professional services, and any other direct cash outflows directly associated with running a business.
Explicit costs are considered a vital consideration in economic analysis as they reflect the actual monetary sacrifices made by a firm to produce goods or services. These costs are deducted from revenue during accounting periods to determine gross profit and net profit, ultimately influencing the calculation of operating income and the overall financial performance of a business.
Explicit costs are distinct from implicit costs, which refer to the opportunity costs incurred or the forgone alternatives or non-monetary sacrifices made by a firm when utilizing its resources for a particular purpose. Explicit costs, in contrast, involve actual monetary transactions and tangible expenses that can be easily observed and recorded.
Common Misspellings for EXPLICIT COST
- wxplicit cost
- sxplicit cost
- dxplicit cost
- rxplicit cost
- 4xplicit cost
- 3xplicit cost
- ezplicit cost
- ecplicit cost
- edplicit cost
- esplicit cost
- exolicit cost
- exllicit cost
- ex-licit cost
- ex0licit cost
- expkicit cost
- exppicit cost
- expoicit cost
- explucit cost
- expljcit cost
- explkcit cost
Etymology of EXPLICIT COST
The term "explicit cost" is a compound word consisting of two parts: "explicit" and "cost".
The word "explicit" comes from the Latin word "explicitus", which means "unambiguous" or "clearly stated". In English, "explicit" refers to something that is expressed or directly stated, leaving no room for doubt or confusion.
The word "cost" stems from the Old French word "coste", meaning "side" or "slope", and it ultimately originates from the Latin word "constare", meaning "to stand together" or "to cost".
When combined, "explicit cost" refers to the direct and clear costs associated with a particular decision or action. These costs can be easily identified, calculated, and measured. The concept is often used in economics and finance to refer to the actual monetary expenses incurred when making a choice or engaging in an activity.
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