Common and Special Costs

Factor costs are divided into special and common depending on whether or not they are used exclusively for the operation of a cost center , for the creation of a single product, a defined set of products or a production process.

This distinction is relative. The same production factor can be considered special or common, in relation to the type of cost object to which it refers. If the electric lighting factor is considered for Department A’s cost center, the relative cost is a special cost. If, on the other hand, it is considered for one of the two or more products that are made in department A, the relative cost is considered common.

The distinction between special costs and common costs is therefore affected by the technical organization of production and the reference object.

However, this distinction is not always easy.
Think of the case of a worker who is used on the same day in two distinct departments and for defined periods. Since the cost factor
of that worker is the hourly cost, we have that for each of the two departments the cost of that worker constitutes a special cost. The same applies if the worker is used for the production of two distinct products. As can be seen, the cost of a special о common factor also depends on the cost unit chosen for the factor itself.

The distinction between special costs and common costs being of a substantial functional type is not accepted by all. The most used distinction is that between direct costs and indirect costs.

by Abdullah Sam
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