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Throughput Costing

Throughput Costing. Variable Costing Also called Direct Costing Match all mfg costs except FMOH Focuses on Contri-bution Margin This isn’t GAAP. Throughput Costing Also called Super-Variable Costing Match only for direct materials Focuses on Through-put Contribution

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Throughput Costing

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  1. Throughput Costing

  2. Variable Costing Also called Direct Costing Match all mfg costs except FMOH Focuses on Contri-bution Margin This isn’t GAAP Throughput Costing Also called Super-Variable Costing Match only for direct materials Focuses on Through-put Contribution This also isn’t GAAP A Third Way to Calculate Cost of Goods Sold and Income

  3. Example of Throughput Costing 10,000 units are made, 9,000 are sold. Each unit sells for $350. Variable mfg costs are $150 per unit, consisting of $90 in materials, $40 in direct labor, and $20 in variable mfg overhead. Fixed mfg costs are $700,000. Variable non-mfg costs: $50 per unit sold. Fixed non-mfg costs are $400,000.

  4. Throughput Costing Total inventoriable cost per unit: Only the $90 in direct materials

  5. Throughput ContributionIncome Statement Sales (9,000 x $350) $3,150,000 D.M. COGS (9K x $90) 810,000 Throughput Contribution 2,340,000 Mfg costs other than d.m.: ($40 + $20) x 10,000 units 600,000 Fixed Mfg Overhead 700,000 Non-mfg costs* 850,000 Income $ 190,000 *The same as under Absorption and Variable Costing

  6. Reconciliation of Throughput Costing Income to Variable Costing Income Throughput Costing Income $190,000 Variable Costing Income 250,000 Difference 60,000 Direct labor and variable mfg overhead expensed under throughput costing, in ending inventory under variable costing: 1,000 units x $60 per unit = 60,000

  7. Summary of Income under Absorption, Variable and Throughput Costing

  8. Calculate Ending Inventory under Absorption, Variable and Throughput Costing 10,000 units are made, 9,000 are sold. Each unit sells for $350. Variable mfg costs are $150 per unit, consisting of $90 in materials, $40 in direct labor, and $20 in variable mfg overhead. Fixed mfg costs are $700,000. Variable non-mfg costs: $50 per unit sold. Fixed non-mfg costs are $400,000.

  9. Calculate Ending Inventory under Absorption, Variable and Throughput Costing Absorption Costing: 1,000 units x $220 per unit = $220,000 Variable Costing: 1,000 units x $150 per unit = $150,000 Throughput Costing: 1,000 units x $90 per unit = $90,000

  10. Summary of Income under Absorption, Variable and Throughput Costing

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