Explore BrainMass

Example of Joint Costs

I have a question. At my work, I support a particular group of people with the back up assistance of a consultant from a 3rd party supplier. This 3rd party supplier backs me up as well as a colleague of mine who supports an entirely separate group of customers. My colleague's customer base is much smaller than mine but a higher profile group, therefore they get a larger chunk of the supplier's time. I think we broke it up like 40/60, where I get the 40%. The supplier is also paid from my group for the 40% and from my colleague's group for their 60%. There is no real way to determine exactly how much time he truly spends on each group (at least, I don't think there is) but the funds allocated to him come from our two separate groups.

My question is....would this be an example of step-down or joint costs? Or one rather than the other?

Solution Preview

This is an example of a joint cost because two groups are simultaneously benefiting from ...

Solution Summary

A student requests if their current situation is a Step-down or Joint Costs situation. Their situation was a good example of joint costs and the reasons why are explained. The reasons why this situation is not a Step Down cost are also given.