Cost Accounting: A Managerial Emphasis, 15th Edition
Cost Accounting: A Managerial Emphasis, 15th Edition
15th Edition
ISBN: 9780133803815
Author: Charles T. Horngren, Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
bartleby

Concept explainers

bartleby

Videos

Textbook Question
100%
Chapter 5, Problem 5.1Q

What is broad averaging, and what consequences can it have on costs?

Expert Solution & Answer
Check Mark
To determine

Broad Averaging:

Broad averaging is also known as peanut butter cost is a costing approach of distributing the overall overhead cost of resources on the average basis to the associate cost of product.

Indirect Cost or Overheads:

Indirect cost is that cost which cannot be directly identified with the manufacturing of a particular product.

To explain: Broad averaging and consequences of broad averaging on cost.

Answer to Problem 5.1Q

  • Broad averaging is the costing approach of allocating the overall indirect cost of manufacture to the associated product cost. The use of this costing approach is to find out the estimate cost of a particular product.
  • The consequence of broad averaging is that it does not tell the actual estimation cost of a product, it leads to over estimation or under estimation cost of a product.

Explanation of Solution

  • Broad averaging helps to allocate the indirect cost or overhead cost of manufacture on the basis of percentage of total cost or on average basis to the associate cost of a product.
  • A manufacture cannot determine the actual estimation cost of a product. The broad averaging costing approach leads to undervalued or overvalued the cost of a product.
Conclusion

Broad averaging helps to distribute the overhear cost and the consequences of broad averaging is that the cost of a product leads to over costing or under costing.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
03:11

Additional Business Textbook Solutions

Find more solutions based on key concepts
Knowledge Booster
Accounting
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Recommended textbooks for you
  • Managerial Accounting: The Cornerstone of Busines...
    Accounting
    ISBN:9781337115773
    Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
    Publisher:Cengage Learning
    Managerial Accounting
    Accounting
    ISBN:9781337912020
    Author:Carl Warren, Ph.d. Cma William B. Tayler
    Publisher:South-Western College Pub
    Principles of Cost Accounting
    Accounting
    ISBN:9781305087408
    Author:Edward J. Vanderbeck, Maria R. Mitchell
    Publisher:Cengage Learning
  • Principles of Accounting Volume 2
    Accounting
    ISBN:9781947172609
    Author:OpenStax
    Publisher:OpenStax College
    Survey of Accounting (Accounting I)
    Accounting
    ISBN:9781305961883
    Author:Carl Warren
    Publisher:Cengage Learning
    Cornerstones of Cost Management (Cornerstones Ser...
    Accounting
    ISBN:9781305970663
    Author:Don R. Hansen, Maryanne M. Mowen
    Publisher:Cengage Learning
  • Managerial Accounting: The Cornerstone of Busines...
    Accounting
    ISBN:9781337115773
    Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
    Publisher:Cengage Learning
    Managerial Accounting
    Accounting
    ISBN:9781337912020
    Author:Carl Warren, Ph.d. Cma William B. Tayler
    Publisher:South-Western College Pub
    Principles of Cost Accounting
    Accounting
    ISBN:9781305087408
    Author:Edward J. Vanderbeck, Maria R. Mitchell
    Publisher:Cengage Learning
    Principles of Accounting Volume 2
    Accounting
    ISBN:9781947172609
    Author:OpenStax
    Publisher:OpenStax College
    Survey of Accounting (Accounting I)
    Accounting
    ISBN:9781305961883
    Author:Carl Warren
    Publisher:Cengage Learning
    Cornerstones of Cost Management (Cornerstones Ser...
    Accounting
    ISBN:9781305970663
    Author:Don R. Hansen, Maryanne M. Mowen
    Publisher:Cengage Learning
    Cost control, Why cost control is necessary for a business?; Author: Educationleaves;https://www.youtube.com/watch?v=yMg3gJx48Fg;License: Standard youtube license