CACI No. 3306. Methods of Allocating Costs to an Individual Product

Judicial Council of California Civil Jury Instructions (2020 edition)

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3306.Methods of Allocating Costs to an Individual Product
Although no formula for determining the appropriate cost of a
particular [product/service] is set by law, [insert one of the following:]
[the determination of the appropriate cost of [manufacture/distribution]
of a particular product must be reasonably related to the burden the
product puts on [name of defendant]’s overall cost of doing business.]
[the determination of the cost of providing particular services must be
reasonably related to the burden the service puts on [name of defendant]’s
overall cost of doing business.]
New September 2003
Directions for Use
Regarding the first bracketed sentence, if all of the defendant’s products are
approximately the same, there is no need to allocate the indirect expense, i.e.,
overhead, according to the unique “burden” each product generates. In such cases,
this paragraph could unnecessarily confuse the jury and should be modified or
deleted.
Sources and Authority
• “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, 432 [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
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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
3 Levy 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
(Matthew Bender)
23 California Points and Authorities, Ch. 235, Unfair Competition (Matthew Bender)
3307-3319. Reserved for Future Use
UNFAIR PRACTICES ACT CACI No. 3306
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