Question

Advocates of throughput costing maintain that ________.

A) both variable and fixed are necessary to produce goods; therefore, both types of costs should be inventoried

B) all manufacturing costs plus some design costs should be inventoried

C) fixed manufacturing costs are related to the capacity to produce rather than to the actual production of specific units

D) except direct labor no other costs are truly variable in output

Tall Statues Inc., produces wood statues. Management has provided the following information:

Actual sales30,000 statues

Budgeted production50,000 statues

Selling price              $46.00 per statue

Direct material costs              $6.90 per statue

Variable manufacturing costs              $3.45 per statue

Variable administrative costs              $5.75 per statue

Fixed manufacturing overhead              $4.60 per statue

8) What is the cost per statue if throughput costing is used?

A) $20.70

B) $16.10

C) $10.35

D) $6.90

9) What is the total throughput contribution?

A) $1,069,500

B) $897,000

C) $1,173,000

D) $759,000

Answer the following questions using the information below:

Daniel Rubber Company produces a specialty item. Management has provided the following information:

Actual sales110,000 units

Budgeted production100,000 units

Selling price              $40.00 per unit

Direct material costs              $8.00 per unit

Variable manufacturing overhead              $3.00 per unit

Variable administrative costs              $5.00 per unit

Fixed manufacturing overhead              $4.00 per unit

10) What is the cost per statue if throughput costing is used?

A) $20.00

B) $17.00

C) $13.00

D) $8.00

11) What is the total throughput contribution?

A) $2,640,000

B) $3,190,000

C) $3,520,000

D) $4,070,000

12) Which of the following inventory costing methods results in the least amount of costs being inventoried?

A) absorption costing

B) variable costing

C) throughput costing

D) direct costing

13) Which of the following inventory costing methods shown below is most likely to cause undesirable incentives for managers to build up finished goods inventory?

A) absorption costing

B) variable costing

C) throughput costing

D) direct costing

14) Throughput costing considers only direct materials and direct manufacturing labor to be truly variable costs.

15) Absorption costing is also referred to as super-variable costing.

16) When production quantity exceeds sales, throughput costing results in reporting lower operating income than variable costing.

Answer 1

Answer to first question in the list: Option-(C): fixed manufacturing costs are related to the capacity to produce rather than to the actual production of specific units Reason: Option-(C) is correct because under throughput costing (also called as super variable costing), only direct material cost shall be considered as unit product. In other words, all costs except direct material cost are considered as period cost under throughput costing. It argues that only direct materials are truly variable. It also argues that the direct manufacturing labor cost is relatively fixed and so it shall be considered as cost for the period and not for the product. Similarly, variable manufacturing costs are also cost of the period & not for the product. Option-(A) & (B) are incorrect because throughput costing argues that only direct material cost is variable and it only should be considered as product cost. Option-(D) is incorrect because except direct materials, no other costs are truly variable in output but it says direct labor as truly variable.