California Civil Jury Instructions (CACI) (2017)

3303. Definition of "Cost"

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3303.Definition of “Cost”
The term “cost” means all costs of doing business, including fixed costs
that do not tend to change with sales, such as heat and light, as well as
variable costs that do tend to change with sales, such as sales
commissions.
Costs of doing business may include the following:
1. Labor, including salaries of executives and officers;
2. Rent and utilities;
3. Interest on loans;
4. Depreciation;
5. Selling cost;
6. Maintenance of equipment;
7. Delivery costs;
8. Credit losses;
9. Advertising costs;
10. Licenses, taxes; [and]
11. Insurance; [and]
12. [Insert other cost(s).]
[The term “cost” as applied to warranty service agreements also
includes the cost of parts and delivery of the parts.]
[The term “cost” as applied to distribution also includes either the
invoice cost or replacement cost of the product, whichever is lower.]
[The term “cost” as applied to services also includes the prevailing wage
at the time and place these services were provided if [name of defendant]
was paying less than the prevailing wage.]
Any discounts given for cash payments may not be used to lower costs.
New September 2003
Directions for Use
The bracketed paragraphs should be inserted as appropriate to the facts.
In cases involving the sale of cellular telephones and cigarettes, Business and
Professions Code sections 17026.1 and 17026.5 measure “cost” somewhat
differently.
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Sources and Authority
• “Cost” Defined. Business and Professions Code section 17026.
• “Cost of Doing Business” or “Overhead” Defined. Business and Professions
Code section 17029.
• Prevailing Wage Used to Determine Cost. Business and Professions Code
section 17076.
• “Determination of the defendant’s cost has always been treated as an issue of
fact.” (Pan Asia Venture Capital Corp. v. Hearst Corp. (1999) 74 Cal.App.4th
424, 433 [88 Cal.Rptr.2d 118].)
• “These statutes embody California’s fully allocated cost standard, that is, a fair
allocation of all fixed or variable costs associated with production of the article
or product.” (Pan Asia Venture Capital Corp., supra, 74 Cal.App.4th at p. 432,
footnote omitted.)
• “Cost is to be measured as ‘the fair average cost of production over a
reasonable time, rather than the cost of one item on a particular occasion.’ ”
(Pan Asia Venture Capital Corp., supra, 74 Cal.App.4th at p. 432, fn. 6,
internal citation omitted.)
• “Variable costs are costs that vary with changes in output, while fixed costs are
those that do not vary with changes in output.” (Turnbull & Turnbull v. ARA
Transportation Inc. (1990) 219 Cal.App.3d 811, 820 [268 Cal.Rptr. 856].)
• “California employs a fully allocated cost standard to determine whether a sale
has violated section 17043. Under sections 17026 and 17029 . . . cost means
invoice cost plus the vendor’s full cost of doing business or six percent.”
(G.H.I.I. v. Mts, Inc. (1983) 147 Cal.App.3d 256, 275 [195 Cal.Rptr. 211],
internal citations omitted.)
• “We find the use of the fully allocated cost method, when viewed in
conjunction with the injurious intent requirement of section 17043, is rationally
related to the valid legislative purpose . . . as it assists in preventing the
creation or perpetuation of monopolies.” (Turnbull & Turnbull, supra, 219
Cal.App.3d at p. 822.)
• “To be legally acceptable, the allocation of indirect or fixed overhead costs to a
particular product or service must be reasonably related to the burden such
product or service imposes on the overall cost of doing business.” (Turnbull &
Turnbull, supra, 219 Cal.App.3d at p. 822.)
Secondary Sources
1 Witkin, Summary of California Law (10th ed. 2005) Contracts, §§ 609–615
3Levy et al., California Torts, Ch. 40, Fraud and Deceit and Other Business Torts,
§ 40.153 (Matthew Bender)
49 California Forms of Pleading and Practice, Ch. 565, Unfair Competition,
§ 565.52 (Matthew Bender)
23 California Points and Authorities, Ch. 235, Unfair Competition, § 235.22 et seq.
(Matthew Bender)
UNFAIR PRACTICES ACT CACI No. 3303
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