Imputed Cost

DEFINITION of 'Imputed Cost'

A cost that is incurred by virtue of using an asset instead of investing it or undertaking an alternative course of action. An imputed cost is an invisible cost that is not incurred directly, as opposed to an explicit cost, which is incurred directly.

Imputed cost is also known as "implied cost" or "opportunity cost".

BREAKING DOWN 'Imputed Cost'

For example, businesses that were created decades ago may own very valuable real estate in the downtown core. The imputed cost for such businesses is equal to the interest that the business would earn if those funds were invested. Another example of an imputed cost is that of a worker's decision to go back to school. The imputed cost in this case is the loss of wages.

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