Throughput Costing
Some managers maintain that even variable costing promotes an excessive amount of
costs being inventoried. They argue that only direct materials are “truly variable” in output.
Throughput costing, which also is called super-variable costing, is an extreme form
of variable costing in which only direct material costs are included as inventoriable costs.
All other costs are costs of the period in which they are incurred. In particular, variable
direct manufacturing labor costs and variable manufacturing overhead costs are
regarded as period costs and are deducted as expenses of the period.
Exhibit 9-5 is the throughput-costing income statement for Stassen Company for
2012, 2013, and 2014. Throughput margin equals revenues minus all direct material cost
of the goods sold. Compare the operating income amounts reported in Exhibit 9-5 with
those for absorption costing and variable costing:
O