Explicit Costs

Explicit costs refer to direct, out-of-pocket expenses that a business incurs in the course of its operations. These are tangible costs that can be easily measured and documented, such as wages, rent, utilities, and materials. In the context of Cost Benefit Analysis, explicit costs are essential to consider because they affect the overall profitability and viability of a project or decision. By accurately identifying and quantifying these costs, businesses can better weigh the potential benefits against the financial investment required.