Throughput Costing. A Third Way to Calculate Cost of Goods Sold and Income Variable Costing Also...
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Throughput Costing
Transcript of Throughput Costing. A Third Way to Calculate Cost of Goods Sold and Income Variable Costing Also...
Throughput Costing
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
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) 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
Reconciliation of Throughput Costing Income to
Variable Costing Income
Throughput Costing Income $190,000Variable Costing Income 250,000Difference 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 CostingAbsorption
CostingVariable 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 CostingAbsorption 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 CostingAbsorption
CostingVariable Costing
Throughput Costing
Income:
Ending inventory
$320,000
$220,000
$250,000
$150,000
$190,000
$90,000
