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Explain the following terms as used in cost accounting 1. Explicit cost 2. Implicit cost

      

Explain the following terms as used in cost accounting 1. Explicit cost 2. Implicit cost

  

Answers


KevinNyabute
Explicit Costs are the costs which involve an immediate outlay of cash from the business. The cost is incurred when any production process is going on, or activity is conducted in the normal course of business. The cost is a charge for the use of factors of production like land, labour, capital and so on. They are in the form of rent, salary, material, wages, and other expenses like electricity, stationery, postage, etc.
Implicit Cost, also known as the economic cost, is the cost which the company had foregone while employing the alternative course of action. They do not involve any outflow of cash from the business. It is the value of sacrifice made by the entity at the time of exercising some other action. The cost occurs when an asset is used as a factor of production by the entity instead of renting it out.
kevinnyabute answered the question on March 5, 2018 at 07:37


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