1. Throughput Costing

2. 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

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 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

6. 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

7. Summary of Income under Absorption, Variable and Throughput Costing
Absorption Costing
Variable Costing
Throughput Costing
Income:
$320,000
$250,000
$190,000

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
Absorption Costing
Variable Costing
Throughput Costing
Income:
Ending inventory
$320,000
$220,000
$250,000
$150,000
$190,000
$90,000