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 ?
Indirect expenses can be allocated by commission volume, commissions, number of employees, number of accounts or time spent.
He underlines the significance of this study in calculating the indirect expenses endured by the Government because of the crisis indicating that the Government is scientifically and statistically attempting and in partnership with UN organizations and international agencies to document the international needs, the needs of the hosting communities and the Treasury to ask for support to alleviate the effect of the crisis that might go on and on.
Direct and indirect expenses also rose with the rising price of fuel by 65%, reaching a litre price of EGP 1.80, compared to EGP 1.10 prior to raising diesel prices in July 2014.
According to its latest How America Pays for College study, Sallie Mae, the Student Loan Marketing Association, reported that families spent an average $24,164 on college, including tuition, room and board, and other indirect expenses for the 2014-2015 college year.
* The expense attribution will be either 1) direct expenses plus an apportioned amount of indirect expenses, or 2) 40% of investment income.
" As the prices of the basic vegetables, pulses and the perishable groceries have gone up, we have cut back on eating out and some other indirect expenses such as Internet and travelling to manage the budget," he said.
The total indirect expenses caused by the amputees is more than SR 88 billion.
Consider that the average overall economic cost, including direct and indirect expenses, of a heart attack in the United States is approximately $1 million2, an amount that could decimate an employee's life savings and retirement future.
Operating Expenses = Indirect Expenses = Sales, General and Admin.
BALTIMORE--The 35,000 American suicides that occurred in 2007 as well as attempted suicides that year cost the United States a total of roughly $48 billion in direct and indirect expenses.
While this process is not easy to change, cities can do a better job of assessing the full impact of both direct and indirect expenses before approving negotiated salary packages.