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Joint cost

Joint cost is the shared cost of a process producing joint outputs before the split-off point. It can be apportioned using physical measures or relative values for reporting purposes, depending on the required method. Once incurred and unchanged between alternatives, it is irrelevant to a further-processing decision. The fact that a product shows a loss after an arbitrary joint-cost allocation does not prove that discontinuing or processing it differently will improve total profit.

Worked example

A process costs $20,000 before A and B separate. Refining A adds $3,000 and raises its sales value by $5,000, so further processing improves profit by $2,000 regardless of the existing joint-cost allocation.

Common mistake

Do not use an allocated historical joint cost to reject incremental profit from further processing.

Where it appears in your exams

QualificationExamRelationshipPeriod
ACCA MA Direct September 2026–June 2027
ACCA PM Direct September 2026–June 2027
FIA FMA Direct September 2026–June 2027