What is the Difference Between Tangible and Intangible Cost?
🆚 Go to Comparative Table 🆚The main difference between tangible and intangible costs lies in their quantifiability and the physical nature of the resources they represent.
Tangible costs are expenses that have a direct numerical value and can be quantified, such as salaries, office equipment, and employee training. These costs are often associated with items that have a physical presence, such as equipment, land, or inventory. Some examples of tangible costs include:
- Paying employee wages
- Inventory
- Computer systems
- Assets such as equipment, land, or buildings
Intangible costs, on the other hand, do not have a direct monetary cost associated with them and are more difficult to quantify. These costs often arise from social, legal, or political factors and may impact overall company performance. Examples of intangible costs include:
- Loss of productivity from a position when hiring a new employee
- Time it takes for employees to learn a new computer system and adjust their work routines
- Loss of employee morale or damage to a company's brand or reputation
In summary, tangible costs are quantifiable and often connected to physical items, while intangible costs are unquantifiable and related to non-physical factors. Both types of costs should be considered when making business decisions, as they can have a significant impact on a company's bottom line.
Comparative Table: Tangible vs Intangible Cost
Here is a table comparing the differences between tangible and intangible costs:
| Tangible Costs | Intangible Costs |
|---|---|
| Easily quantifiable and measurable in monetary terms | More abstract and challenging to evaluate |
| Associated with physical items, such as equipment, land, or computer systems | Not connected to a physical item, but rather to something structural or behavioral |
| Examples include employee wages, inventory, computer systems, and assets such as equipment, land, or buildings | Examples include a drop in employee morale, a hit to the company's brand or reputation, and the loss of experience when companies invest in new technologies |
| Vital for the organization, as it helps the company in the production of services and goods | Assist the organization in creating their future worth |
Tangible costs are expenses that can be easily quantified and measured in monetary terms, such as raw materials, equipment, utilities, and employee salaries. On the other hand, intangible costs are more abstract and challenging to measure since they involve factors that do not have a direct monetary value attached to them. Intangible costs include a subjective value placed on a circumstance or event in an attempt to quantify the cost. Some examples of intangible costs include a drop in employee morale or a hit to the company's brand or reputation.
- Tangible vs Intangible
- Direct vs Indirect Costs
- Price vs Cost
- Costing vs Cost Accounting
- Variable vs Fixed Costs
- Financial Accounting vs Cost Accounting
- Avoidable vs Unavoidable Cost
- Fixed Cost vs Sunk Cost
- Controllable vs Uncontrollable Cost
- Cost vs Expense
- Cost Benefit vs Cost Effectiveness
- Actual Cost vs Standard Cost
- Implicit Cost vs Explicit Cost
- Sunk Cost vs Opportunity Cost
- Absolute Cost Advantage vs Comparative Cost Advantage
- Activity Based Costing vs Traditional Costing
- Relevant vs Irrelevant Cost
- Financial Assets vs Physical Assets
- Unit Price vs Unit Cost