Intangible Cost

AAA

DEFINITION of 'Intangible Cost'

An unquantifiable cost relating to an identifiable source. Intangible costs represent a variety of expenses such as losses in productivity, customer goodwill or drops in employee morale. While these costs do not have a firm value, managers often attempt to estimate the impact of the intangibles.

INVESTOPEDIA EXPLAINS 'Intangible Cost'

Ignoring intangible costs can have a significant effect on a company's performance. For example, let's examine a potential decision for a widget company to cut back on employee benefits. To improve profits, the firm wants to cut back $100,000 in employee benefits. When news reaches the employees of the cut-back, worker morale will likely drop. The widget production will likely be diminished, as employees focus on losing benefits instead of making products. The loss in production represents an intangible cost, which may be great enough to offset the gain in profits created by reducing employee benefits.

RELATED TERMS
  1. Goodwill

    An account that can be found in the assets portion of a company's ...
  2. Nonmonetary Assets

    Assets in which the right to receive a fixed or determinable ...
  3. Cost-Volume Profit Analysis

    A method of cost accounting used in managerial economics. Cost-volume ...
  4. Tangible Cost

    A quantifiable cost related to an identifiable source or asset. ...
  5. Tax Preference Item

    A type of income, normally tax-free, that may trigger the alternative ...
  6. Intangible Asset

    An asset that is not physical in nature. Corporate intellectual ...
Related Articles
  1. Economics Basics
    Economics

    Economics Basics

  2. Passing The Buck: The Hidden Costs Of ...
    Bonds & Fixed Income

    Passing The Buck: The Hidden Costs Of ...

  3. Can You Count On Goodwill?
    Personal Finance

    Can You Count On Goodwill?

  4. How To Evaluate A Company's Balance ...
    Investing Basics

    How To Evaluate A Company's Balance ...

Hot Definitions
  1. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  2. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
  3. Call Risk

    The risk, faced by a holder of a callable bond, that a bond issuer will take advantage of the callable bond feature and redeem ...
  4. Parity Price

    When the price of an asset is directly linked to another price. Examples of parity price are: 1. Convertibles - the price ...
  5. Earnings Multiplier

    An adjustment made to a company's P/E ratio that takes into account current interest rates. The earnings multiplier is used ...
  6. Macroeconomics

    The field of economics that studies the behavior of the aggregate economy. Macroeconomics examines economy-wide phenomena ...
Trading Center