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Throughput Costing
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A Third Way to Calculate Cost of Goods Sold and Income
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
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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.
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Throughput Costing Total inventoriable cost per unit:
Only the $90 in direct materials
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Throughput Contribution Income Statement
Sales (9,000 x $350) $3,150,000 D.M. COGS (9K x $90) ,000 Throughput Contribution 2,340,000 Mfg costs other than d.m.: ($40 + $20) x 10,000 units 600,000 Fixed Mfg Overhead ,000 Non-mfg costs* ,000 Income $ 190,000 *The same as under Absorption and Variable Costing
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Reconciliation of Throughput Costing Income to Variable Costing Income
Difference ,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
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Summary of Income under Absorption, Variable and Throughput Costing
Absorption Costing Variable Costing Throughput Costing Income: $320,000 $250,000 $190,000
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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.
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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
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Summary of Income under Absorption, Variable and Throughput Costing
Absorption Costing Variable Costing Throughput Costing Income: Ending inventory $320,000 $220,000 $250,000 $150,000 $190,000 $90,000
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