What is ‘Underlying Cost’
Any expense that may be projected to occur during the budgetary period succeeding the current one. Underlying costs are expenses that the firm anticipates incurring and paying out throughout the course of the budget period. Items such as rent, lease, or mortgage, depreciation, utilities, and so on are examples of what is meant by this.
In the aggregate, the underlying cost may refer to the fundamental cost of anything, omitting any special charges that occur only seldom, such as travel expenses.
Explaining ‘Underlying Cost’
For example, a widget could cost $1 to build, but an unanticipated factory stoppage results in expenses of $2 per widget over the course of the term. If the exceptional expenditures are excluded, the underyling cost would be $1, which is exactly the amount that the corporation anticipates the cost to be in the future.
Further Reading
- Viewpoint of Financial Management: Considerations Underlying Cost of Capital – www.tandfonline.com [PDF]
- Underlying factors of ups and downs in financial leverage overtime – journals.sagepub.com [PDF]
- Option pricing when the underlying asset earns a below-equilibrium rate of return: A note – www.jstor.org [PDF]
- IAS 39: Underlying principles – www.tandfonline.com [PDF]
- The market liquidity of DIAMONDS, Q’s, and their underlying stocks – www.sciencedirect.com [PDF]
- Options trading and the bid-ask spread of the underlying stocks – www.jstor.org [PDF]
- Factors underlying the employment effects of financial assistance policies – www.tandfonline.com [PDF]
- Strategic entrepreneurship in New Zealand’s state-owned enterprises: underlying elements and financial implications – openrepository.aut.ac.nz [PDF]
- Macroeconomic impacts of oil prices and underlying financial shocks – www.sciencedirect.com [PDF]
- Transaction cost economics: An assessment of empirical research in the social sciences – www.cambridge.org [PDF]
