Monetary payments made by individuals, firms, and governments for the use of land, labor, capital, and entrepreneurial ability owned Explicit Cost (also known as accounting costs).
Explicit cost refers to the cost incurred on account of purchase of factor and non factor inputs from the market.
Explicit cost is a payment made to others during the course of running a business that represents the outflows of cash in clear and obvious terms. Explicit costs include things like wages, mortgage, rent, utilities, advertisements, raw materials and other general, administrative and sales costs.
The condition of explicit costs is that it must be cash. If an accountant included amortization or depreciation under explicit costs, it would be inaccurate.
Here is a look at how explicit costs are calculated:
Explicit costs = cash outflows from the company's financial statement
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