Transcription of CHAPTER 5 ACTIVITY-BASED COSTING AND ACTIVITY …
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CHAPTER 5 ACTIVITY-BASED COSTING AND ACTIVITY …
EA 5-1 CHAPTER 5 ACTIVITY - based COSTING AND ACTIVITY - based MANAGEMENT 5-1 What is broad averaging, and what consequences can it have on costs? Broad averaging (or peanut-butter COSTING ) describes a COSTING approach that uses broad averages for assigning (or spreading, as in spreading peanut butter) the cost of resources uniformly to cost objects when the individual products or services, in fact, use those resources in non-uniform ways. Broad averaging, by ignoring the variation in the consumption of resources by different cost objects, can lead to inaccurate and misleading cost data, which in turn can negatively impact the marketing and operating decisions made based on that information.
with respect to ABC? I. Departmental costing systems are a refinement of ABC systems. II. ABC systems are useful in manufacturing, but not in merchandising or service industries. III.ABC systems can eliminate cost distortions because ABC develops cost drivers that have a cause-and-effect relationship with the activities performed. 1.
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