Implicit Cost Explained: How They Work, With Examples

Implicit costs represent the opportunity cost that arises when a company uses internal resources toward a project without any explicit compensation for the utilization of resources. They aren't quantifiable and represent a loss of potential income. These costs contrast with explicit costs, which are recorded for accounting purposes, but also help managers make effective decisions. Examples of implicit costs include the loss of interest income and small business owners forgoing a salary.
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