implicit cost

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Implicit Cost

The opportunity cost of an activity. Implicit costs are what a company or individual could have earned had a different decision been made. For example, suppose an independent consultant has two clients and she spends some time working on the first client's project. The implicit costs are what the consultant would have made had she worked on the second client's project instead. Implicit costs contrast with explicit costs, which are what someone actually spends on an activity. It is also called an indirect cost.

implicit cost

or

imputed cost

the OPPORTUNITY COST to a FIRM of using resources owned by the firm itself to produce its output. For example, if a firm occupies a building that it owns, it forgoes the opportunity of renting it out for some other use. Thus, implicit costs represent the sacrifice of income that could have been earned by renting out (or selling) the firm's resources to others.

To achieve an accurate measure of the total cost of producing goods or services, the firm must impute a rent to itself using a SHADOW PRICE based upon the current market rates for renting the property See PROFIT, EXPLICIT COST.

implicit cost

or

imputed cost

the OPPORTUNITY COST to a FIRM of using resources owned by the firm itself to produce its output. For example, if a firm occupies a building that it owns, it foregoes the opportunity of renting it out for some other alternative use. Thus, implicit costs represent the sacrifice of income that could have been earned by renting out (or selling) the firm's resources to others.

To achieve an accurate measure of the total cost of producing goods or services, the firm must impute a rent to itself based upon the current market rate for renting the property See PROFIT, EXPLICIT COST, SHADOW PRICE.

References in periodicals archive ?
The two companies are combining ABeam Consulting s ABeam Innovative Cost Optimization Solutions (ABEAM ICOS) with Concur Technologies cloud service to deliver an all-around service to enhance clients indirect expense management systems and establish a structure for indirect expense management.
Starting about 1989 and continuing through 1991, Bagley became aware of false indirect expense claims TRW was making to the government.
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The general definition of a direct expense is a cost item over which the servicing management has control, while indirect expense is generally not controllable.
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Indirect expense refers to costs that management considers to be overhead in running the business.
Abeam Consulting) have entered into a strategic collaboration agreement focusing on indirect expense management.
Now the practices of AdviCoaches can also offer companies and organizations measurable cost savings in various indirect expense categories such as supplies, telecommunications, staffing, printing, maintenance contracts and professional services.
The two companies are combining ABeam Consulting's ABeam Innovative Cost Optimization Solutions (ABEAM ICOS) with Concur Technologies' cloud service to deliver an all-around service to enhance clients' indirect expense management systems and establish a structure for indirect expense management.
In the last 40 years the number of people imprisoned in the United States has grown by a shocking 700%, at a direct cost of more than $50 billion annually and a much higher indirect expense, with no discernible reduction in drug abuse.
During the past year, we've seen acceleration in all sectors of the TEM market, especially as enterprises begin to see the value in improved processes and greater control over one of their largest indirect expense areas," said Eric Goodness, vice president, Gartner Group.
And for good reason, too: it's the only organization of its kind to provide indirect expense assistance to struggling cancer families exclusively.