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Economic Profit
Economic Profit
ECONOMIC COST
ECONOMIC COST = EXPLICIT COST + IMPLICIT COST
IMPLICIT COST
Comes from using an asset you already have rather than renting or buying
a new one, representing an expenditure of resources.
They often represent the loss of income, but not the loss of profit.
Is A Cost Has Been Already Incurred By The Individual Or Business But It Has
Not Been Reported As A Separate Expense
Also help business managers make the most effective decisions for a
company based on profit and market condition.
Are forgone interest and forgone wages
EXAMPLE OF IMPLICIT COST
Bank reserve investment
College courses that you take in place of working job
Sick leave hours for qualifying employees
Required funds on deposit
Training session and hours new employees
The decision to manufacture or produce one product over another
The decision to specialize in making one specific type of product rather than
a variety.
EXPLICIT COST
Are atypical business costs which appear in the general ledger and have a
direct impact on the profitability of a company
Referred to as accounting cost,