Joint Cost

Written by Fmi.Online Friday January 6, 2023
Joint costs are costs that are incurred from buying or producing two products at the same time. In cost accounting terms, joint costs have the same cost object.

Explanation :

 

Manufacturers  incur many costs in the production process. It is the cost accountant’s job to trace these costs back to a certain product or process (cost object) during production. Some costs cannot be traced back to a single cost object. Some costs benefit more than one product or process in the manufacturing process. These costs are called joint costs. Almost all manufacturers incur joint costs at some level in the manufacturing process.

In a nutshell :

 
  • The joint cost refers to that cost which is incurred before the split-off point on the production or manufacturing of multiple products, by consuming the same inputs or factors of production (i.e., raw material and manufacturing process). 
  • This type of cost accounting  is usually common in primary industries.
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