Common Costs and Joint Costs.
Common costs and joint costs are types of indirect
costs. Common costs are costs of facilities or services employed by two or more operations.
Common costs are particularly prevalent in organizations with many departments
or segments. The degree of segmentation increases the tendency for more costs to be
common. For example, the salary of the marketing vice-president is usually not a common
cost shared with the human resources department. If the marketing department provides
its service to several segments of the entire firm, however, it can be considered a
common cost shared by those segments.