Question

9-22 Throughput costing (continuation of 9-21). The variable maufacturing costs per unit of Nascar Motors are as follows:

Answer 1

The Income Statement for Nascar Motors in April and May 2017 under Throughput Costing is given as attached.

What is a throughput costing?

This refers a costing technique, also known as super-variable costing, which solely takes direct materials into account when calculating product costs.

The other expenses are all classed as period costs and are all deducted from income in the time period in which they are spent.

What is the Contrast between the results in requirement 1 with those in requirement 1 of Exercise 9-21?

It is to be noted that Throughput costing has the lowest operating income in April while having the greatest operating income in May.

More so than either absorption or variable costing, throughput costing emphasizes sales as the source of operational income. See the attached.

What is one motivation for Nascar Motors to adopt throughput costing?

It is to be noted that production that doesn't result in a commensurate sale in the same time period is penalized under throughput costing.

When compared to variable costing, costs that are variable with regard to production but are not direct materials are expensed in the period of incurrence.

In contrast to variable costing or absorption costing, throughput costing offers less of motivation to create inventory.

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