common costs


common costs
1) In process costing, those costs incurred by a process before the point at which the joint products or by-products are subjected to separate treatment. The common costs, therefore, must be borne by all the output, i.e. by the main product, the joint products, and the by-products.
See also: joint costs
2) Costs regarded as unchanged as a result of a managerial decision. For example, if an increase in production is being considered, the total rent payable would be described as a cost common to both the situations before and after the production increase as the rent did not change as a result of the decision to increase production.
Compare: relevant costs
3) Costs that are common to a number of processes or products and are therefore shared by them. Common costs are usually fixed costs and require allocation to the appropriate cost objects.

Accounting dictionary. 2014.

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