Explicit Costs

Tax Glossary Definition

Explicit Costs

Explicit costs are the actual, out-of-pocket expenditures made by individuals or organizations for obtaining goods, services, or productive resources. These costs are clearly identifiable and recorded in financial statements, representing tangible payments such as wages, rent, raw materials, utilities, and other direct operating expenses. They reflect the monetary outflow directly associated with conducting business operations.

Example: The explicit costs of running a manufacturing unit may include employee salaries, factory rent, electricity charges, and the cost of raw materials used in production.

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