capacity. (In those cases, where the calculations of separable cost may be unduly
burdensome, the specific costs may be used).
Consider a list of i comprising specific project purposes, where i ¼ 1 (water
supply), 2 (power generation), 3 (recreation), etc. Any cost clearly attributable to a
specific project purpose i, forms part of the separable costs (C i ). These can be
identified or isolated by considering each purpose, one by one, as a marginal purpose
Let T ¼ the project’s total costs inclusive of all purposes
T 2i ¼ the total cost of a hypothetical project that excludes purpose i
Then, the separable cost of purpose i is given by C i ¼ T – T -i .
It may happen that the separable cost for any one or more purposes might be
negligible.
If CC i represents a purpose’s specific costs, the expression CC i
C i is
always true.
C i – CC i is also called the nonspecific separable costs.
19.3.12 Joint Cost (Common Cost/Distribution Cost)
This comprises the costs of identifiable physical components serving more than one
purpose/function (e. g. dam, reservoir in a multi-purpose project). They are the
residual costs representing the difference between the cost of the multiple-purpose
project as a whole and the total of the specific/separable costs for all project
purposes/functions.
If the total separable costs of all purposes should exceed the cost of the multipurpose project, there are in effect no residual costs, but rather a joint saving, which
can be distributed among purposes/functions by reducing separable costs to obtain
the allocation to each purpose/function instead of adding a portion of residual costs
to each separable cost.
When the estimates of separable cost cannot be made or are difficult to make,
joint costs may be considered to be the difference between the cost of the multipurpose project and the sum of the specific costs for each purpose/function.
The joint costs are attributed to each purpose/function and the sum of the
attributed joint costs and separable/specific costs gives the total allocation to a
purpose/function.
The joint cost is the remaining cost (residue) after all separable costs are deducted
from the total cost of the project. Joint costs (J) refer to those costs which are not
separable. There is much debate about this, because while the attribution of separable
costs is easily understood, the allocation or attribution of joint costs is slightly more
difficult. By definition, J ¼ T – ΣC i . .
Time and nesting complications have not been considered up to here, but they can
be introduced now.
19.3 Basic Definitions Relating to Cost Allocation
543
burdensome, the specific costs may be used).
Consider a list of i comprising specific project purposes, where i ¼ 1 (water
supply), 2 (power generation), 3 (recreation), etc. Any cost clearly attributable to a
specific project purpose i, forms part of the separable costs (C i ). These can be
identified or isolated by considering each purpose, one by one, as a marginal purpose
Let T ¼ the project’s total costs inclusive of all purposes
T 2i ¼ the total cost of a hypothetical project that excludes purpose i
Then, the separable cost of purpose i is given by C i ¼ T – T -i .
It may happen that the separable cost for any one or more purposes might be
negligible.
If CC i represents a purpose’s specific costs, the expression CC i
C i is
always true.
C i – CC i is also called the nonspecific separable costs.
19.3.12 Joint Cost (Common Cost/Distribution Cost)
This comprises the costs of identifiable physical components serving more than one
purpose/function (e. g. dam, reservoir in a multi-purpose project). They are the
residual costs representing the difference between the cost of the multiple-purpose
project as a whole and the total of the specific/separable costs for all project
purposes/functions.
If the total separable costs of all purposes should exceed the cost of the multipurpose project, there are in effect no residual costs, but rather a joint saving, which
can be distributed among purposes/functions by reducing separable costs to obtain
the allocation to each purpose/function instead of adding a portion of residual costs
to each separable cost.
When the estimates of separable cost cannot be made or are difficult to make,
joint costs may be considered to be the difference between the cost of the multipurpose project and the sum of the specific costs for each purpose/function.
The joint costs are attributed to each purpose/function and the sum of the
attributed joint costs and separable/specific costs gives the total allocation to a
purpose/function.
The joint cost is the remaining cost (residue) after all separable costs are deducted
from the total cost of the project. Joint costs (J) refer to those costs which are not
separable. There is much debate about this, because while the attribution of separable
costs is easily understood, the allocation or attribution of joint costs is slightly more
difficult. By definition, J ¼ T – ΣC i . .
Time and nesting complications have not been considered up to here, but they can
be introduced now.
19.3 Basic Definitions Relating to Cost Allocation
543