Ch. 5 - Ch 5 Simple Peanut-Butter Costing spread evenly...

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Ch. 5Simple Peanut-Butter Costing – “spread evenly” broadly averages or spreads the cost of resources uniformly to cost objects (such as products or services) when, in fact, the individual products or services use those resources in nonuniform ways.Product Undercosting – a product consumes a high level of resources per unit but is reported to have a low cost per unit.Product Overcosting – a product consumes a low level of resources per unit but is reported to have a high cost per unit.Product-Cost Cross-Subsidization – means that if a company undercosts one of its products, it will overcost at least one of its other products. The overcosted product absorbs too much cost, making it seem less profitable than it really is. The undercosted product is left with too little cost, making it seem more profitable than it really is.Uniform Spread – it is broadly averaged – across multiple products without managers recognizing the amount of resources each product consumes.

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