Identify whether the costs stated below are implicit costs or explicit

1.	Identify whether the costs stated below are implicit costs or explicit costs. Justify your answer for each: (a) Rent for self owned land. (b) Payment made for advertising.
Answer» (a) Implicit Cost. A cost that is represented by a lost opportunity in the use of a company’s own resources, excluding cash is an implicit cost. (b) Explicit cost A business expense that is easily identified and accounted for is taken under explicit costs.

Identify whether the costs stated below are implicit costs or explicit costs. Justify your answer for each: (a) Rent for self owned land. (b) Payment made for advertising.

Answer»

(a) Implicit Cost. A cost that is represented by a lost opportunity in the use of a company’s own resources, excluding cash is an implicit cost.

(b) Explicit cost A business expense that is easily identified and accounted for is taken under explicit costs.