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    Throughput Costing Example

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    Nikunj Nagar
    Throughput costing is an alternative to variable and absorption costing for calculating cost of goods sold and income. It focuses on throughput contribution by only including direct materials costs in inventoriable costs per unit, rather than direct labor and overhead costs. This results in higher throughput contribution and lower ending inventory values than variable or absorption costing. An example is provided to illustrate the differences in income and ending inventory calculations under the three costing methods.

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    Throughput Costing Example

    Uploaded by

    Nikunj Nagar
    5K views10 pages
    Throughput costing is an alternative to variable and absorption costing for calculating cost of goods sold and income. It focuses on throughput contribution by only including direct materials costs in inventoriable costs per unit, rather than direct labor and overhead costs. This results in higher throughput contribution and lower ending inventory values than variable or absorption costing. An example is provided to illustrate the differences in income and ending inventory calculations under the three costing methods.

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    Throughput costing is an alternative to variable and absorption costing for calculating cost of goods sold and income. It focuses on throughput contribution by only including direct materials costs in inventoriable costs per unit, rather than direct labor and overhead costs. This results in higher throughput contribution and lower ending inventory values than variable or absorption costing. An example is provided to illustrate the differences in income and ending inventory calculations under the three costing methods.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    5K views10 pages

    Throughput Costing Example

    Uploaded by

    Nikunj Nagar
    Throughput costing is an alternative to variable and absorption costing for calculating cost of goods sold and income. It focuses on throughput contribution by only including direct materials costs in inventoriable costs per unit, rather than direct labor and overhead costs. This results in higher throughput contribution and lower ending inventory values than variable or absorption costing. An example is provided to illustrate the differences in income and ending inventory calculations under the three costing methods.

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    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
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    Throughput Costing

    A Third Way to Calculate Cost of Goods Sold and Income


    Variable Costing Throughput Costing

    Also called Direct Also called SuperCosting Variable Costing Match all mfg Match only for direct costs except FMOH materials
    Focuses on Contri- Focuses on Throughbution Margin put Contribution This isnt GAAP This also isnt GAAP

    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.

    Throughput Costing
    Total inventoriable cost per unit:

    Only the $90 in direct materials

    Throughput Contribution Income Statement


    Sales (9,000 x $350) $3,150,000

    D.M. COGS (9K x $90)


    Throughput Contribution Mfg costs other than d.m.:

    810,000
    2,340,000

    ($40 + $20) x 10,000 units 600,000 Fixed Mfg Overhead Non-mfg costs* Income $ 700,000 850,000 190,000

    *The same as under Absorption and Variable Costing

    Reconciliation of Throughput Costing Income to Variable Costing Income


    Throughput Costing Income Variable Costing Income Difference $190,000 250,000 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

    Summary of Income under Absorption, Variable and Throughput Costing


    Absorption Costing Variable Costing Throughput Costing

    Income:

    $320,000

    $250,000

    $190,000

    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.

    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

    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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