Final answer:
The 'peanut-butter effect' in traditional volume-based costing systems refers to uniformly spreading costs across all products. It contrasts activity-based costing where costs are allocated based on actual resource usage. Understanding various cost measures is vital for a firm's decision-making process.
Step-by-step explanation:
The 'peanut-butter effect' generally refers to Option 1: Uniformly spreading costs across all products. This occurs when using traditional volume-based costing systems, which commonly spread overhead costs evenly across all products, regardless of how much or how little each product actually uses those resources. This approach can lead to a distortion in the true cost of products, particularly affecting those with lower production volumes. In contrast, Option 3: Allocating costs based on actual resource usage, refers to activity-based costing (ABC), a more accurate method of cost allocation that identifies actual resource consumption for each product.
Breaking down total costs into fixed cost, marginal cost, average total cost, and average variable cost provides important insights for a firm. Understanding these costs aids in making decisions about the profit-maximizing quantity to produce and the price to charge, particularly when these considerations are combined with an analysis of sales, revenue, and market structure.