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Opportunity Costs
Explicit costs are used in the computation of opportunity costs. An opportunity cost is the total value of an item forgone. It is calculated by adding the explicit and implicit costs of not performing an activity. For example, the purchase of a vehicle by a business represents an explicit cost as the equipment is actually purchased. An implicit cost is the greatest benefit that could have resulted from the use of the funds. This cost could reflect a different vehicle that could have been purchased or the benefit gained from using the funds elsewhere.
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Explicit Cost Definition | Investopediacumentation. Implicit costs are not traceable in a financial system. While management will utilize explicit costs when viewing business operations, implicit costs are only utilized in decision-making or choosing between multiple alternatives. <span>Opportunity Costs Explicit costs are used in the computation of opportunity costs. An opportunity cost is the total value of an item forgone. It is calculated by adding the explicit and implicit costs of not performing an activity. For example, the purchase of a vehicle by a business represents an explicit cost as the equipment is actually purchased. An implicit cost is the greatest benefit that could have resulted from the use of the funds. This cost could reflect a different vehicle that could have been purchased or the benefit gained from using the funds elsewhere. Economic Profit Explicit costs are also utilized in the calculation of economic profit. Economic profit is the total return a company receives based on all costs incurred to attain that Summary
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