What Is the Difference Between Explicit Costs and Implicit Costs

question 259

Essay

What is the difference between explicit costs and implicit costs? List three examples each of explicit costs and implicit costs that may be experienced by a small business.

---

Definitions:

Income Before Taxes

Income before taxes represents a company's earnings before any income tax expense has been deducted, reflecting the profitability of a company's operations.

Overstated

When financial information is reported to be higher than it actually is, often leading to a misrepresentation of a company's financial position.

Dollar-Value LIFO

An inventory valuation method that uses the last-in, first-out principle but accounts for changing prices in dollar terms.

Inventory Information

Crucial data about the products that a company holds for sale, including quantities, locations, and values, essential for effective inventory management.