Difference Between Implicit Cost And Explicit Cost

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Explain the difference between implicit and explicit costs. Give two examples of when an explicit cost is different from an implicit cost Explicit costs are actual costs incurred by the company during production. They are also named accounting costs or direct costs. An explicit cost happens on purpose and has a direct impact on the company and its revenue. Some examples would be rent, insurance, wages, maintenance, materials. Since they leave a paper trail they are easy to be recognized. Implicit costs known also as implied costs or economic costs are not reported or shown as costs. They are more the opportunity loss or deficit form a potential gain or revenue in a given situation or time. They are intangibles, not recorded and have no paper trail. These include lost time, revenue, labor, lost potential. Some of other differences between them are:…show more content…
2. In your own words, explain the difference between accounting and economic profit. Give two examples of when they differ. Accounting profit can be described as the total revenue minus the total cost using accounting principles. They are the explicit costs a business has and consists of the credits and debits of that business. The profit is the result of what the business in question is receiving after selling its merchandise. They also pertain to a certain period of time such as a quarter or fiscal year. Economic profit is shown when all the revenue is higher than the opportunity costs. It consists of the difference between the revenue and total costs, which will include both, the implicit and explicit costs. To put it simply the accounting profit is the gains received by a company after all the economic costs are

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