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Joint Costs

Who charges? Typically incurred by makers or manufacturers.

Charged: Throughout the production process.

Joint costs are common costs shared by many products or processes that are manufactured concurrently. These expenses cannot be clearly attributed to specific items or services. They occur when a corporation produces many items in the same manufacturing process, and the costs incurred benefit all products equally.

Tip: Use an appropriate cost allocation approach, such as the relative sales value or physical quantity method, to assign joint costs to individual items or processes. Ensure that the allocation mechanism you choose appropriately reflects the advantages gained by each product or process.