What is Imputed Cost?

Imputed cost is the cost incurred during the period when an asset is employed for a particular use, rather than redirecting the asset to a different use. This amount is the incremental difference between the two options. Imputed costs are not recorded in an organization’s accounting records, nor are they reported in its financial statements.

Example of Imputed Cost

As an example of imputed cost, a teacher decides to go back to school to earn a master's degree. During the period when she is at school, the imputed cost of this decision is the wages she would otherwise have earned if she had continued to work as a teacher.