What is a Joint Cost?

A joint cost is an expenditure that benefits more than one product, and for which it is not possible to separate the contribution to each product. These expenditures can include direct materials, direct labor, and factory overhead.

Accounting for Joint Costs

The accountant needs to determine a consistent method for allocating joint costs to products. This means identifying the products to which joint costs will be assigned as soon as they are separately identifiable in the production process (known as the split-off point). Joint costs may occur at different points in any manufacturing process.