DEFINITION of 'Tangible Cost'

A tangible cost is a quantifiable cost related to an identifiable source or asset. It can be directly connected to a material item used to conduct operations or run your business. Tangible costs represent expenses arising from such things as purchasing materials, paying employees or renting equipment.

BREAKING DOWN 'Tangible Cost'

Tangible costs are often associated with items that also have related intangible costs. An intangible cost consists of a subjective value placed on a circumstance or event in an attempt to quantify its impact. A tangible cost is the money paid to a new employee to replace an old one. An intangible cost is the knowledge the old employee takes with them when they leave.

Example of a Tangible Cost

For example, let's examine the costs associated with a customer who has received broken merchandise. The company will usually refund the value of the product to the customer, paying a tangible cost. If the customer is still upset over the event, he or she may complain about the poor service to friends. The potential loss of sales, resulting from the friends hearing the complaints, consists of an intangible cost relating to the broken merchandise.

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