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common costs


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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 cost. 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. See cost allocation.

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 cost. 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. See cost allocation.

Subjects: Accounting.


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