Business/Legal Term The calculation method to convert a cost to
an annual basis. The calculation converts a cost for a
performance period that is less than one full year into an
annual cost to correctly reflect the cost in a government cost
estimate. This calculation is performed by first dividing the
cost in the performance period by the number of days in the
performance period to determine the corresponding daily cost and
then multiplying the daily cost by 365.25 days to determine the
annualized cost. To account for leap years, 365.25 is the
average number of days in a year.