Explicit Cost
Plain definition
Out-of-pocket payments a firm actually makes to outsiders for inputs: wages, rent, materials, interest, and taxes.
In economics
Explicit costs are the accounting-visible expenses recorded in financial statements. They are subtracted from revenue to get accounting profit, but economic profit also subtracts implicit costs, so economic analysis counts more than the accountant does.
Example
Paying workers 24,000 in rent are explicit costs — cash leaves the firm.
Common confusion
Explicit costs are confused with total opportunity cost. Explicit costs are only the monetary payments; opportunity cost also includes implicit costs like the owner's forgone salary. Accounting profit uses explicit costs only, while economic profit uses both.