Joint Cost and Common Cost

[sunandaC]

CONCEPT OF JOINT COST & COMMON COST:

Joint Cost

Joint cost is also known as back haul or returning cost. This cost is associated with providing a particular service. For e.g.: a shipment is to be transported from place ‘A’ to place ‘B’. The transport will charge the customer a price which will include all expenses like fuel, taxes, maintenance with his profit margin. After sending off the consignment at place ‘B’, the vehicle has to come back to its original place ‘A’. This cost is fall into returning to place ‘A’ is associated with the earliest cost of consignment. Hence this cost is called as joint cost. Joint costs have significant impact on transportation charges because carrier quotation must include implied joint costs based on consideration regarding an appropriate back- haul shippers and/or back- haul charges against the original shipper.

Common Cost:

If a transporter is delivering different consignment in the same vehicle by combine many LTL(less than truck load) into a single TL (truck load), each LTL is for a different vehicle. Because of this, the vehicle is breaks down and required to be repairs. This cost of repairs cannot be charged to any single consumer because it is common to all the customers. Hence it wills proportionately fixed to all the customers. Therefore it is called a common cost. Common costs such as terminal or management expenses are characterized as overheads. These are often allocated to a shipper according to a level of activity like the number of shipments handled.

 

[Business-education]

Meaning and Definition of Joint Cost

Joint cost is the collection of the common operation costs incurred before a point called, split-off point, where joint products are identified as individual products. It can also be defined as the cost to operate joint-product processes including the disposal of waste.

Meaning and Definition of Common Cost

Expense chargeable in accounting to the business as a whole : cost assigned to several departments or operations.

:SugarwareZ-196:

 

[bhautik.kawa]

CONCEPT OF JOINT COST & COMMON COST:

Joint Cost

Joint cost is also known as back haul or returning cost. This cost is associated with providing a particular service. For e.g.: a shipment is to be transported from place ‘A’ to place ‘B’. The transport will charge the customer a price which will include all expenses like fuel, taxes, maintenance with his profit margin. After sending off the consignment at place ‘B’, the vehicle has to come back to its original place ‘A’. This cost is fall into returning to place ‘A’ is associated with the earliest cost of consignment. Hence this cost is called as joint cost. Joint costs have significant impact on transportation charges because carrier quotation must include implied joint costs based on consideration regarding an appropriate back- haul shippers and/or back- haul charges against the original shipper.

Common Cost:

If a transporter is delivering different consignment in the same vehicle by combine many LTL(less than truck load) into a single TL (truck load), each LTL is for a different vehicle. Because of this, the vehicle is breaks down and required to be repairs. This cost of repairs cannot be charged to any single consumer because it is common to all the customers. Hence it wills proportionately fixed to all the customers. Therefore it is called a common cost. Common costs such as terminal or management expenses are characterized as overheads. These are often allocated to a shipper according to a level of activity like the number of shipments handled.

hi sunanda,

I am also uploading a document which will give you the detailed Common Costs Allocation and you can use it for your project.