ABSORPTION COSTING VERSUS THROUGHPUT COSTING
The book The Goal illustrates the concept of throughput costing. For the problem below
prepare all journal entries and determine the impact on the income statement of the
differences between absorption costing (normal accounting) and throughput costing.
HINT: pay very careful attention to definitions of throughput, inventory and operating
expense from the book
BUDGETED MANUFACTURING COSTS
DIRECT MATERIAL				$ 20	PER UNIT
DIRECT LABOR				$ 2	PER UNIT
VARIABLE OVERHEAD				$ 10	PER UNIT
FIXED OVERHEAD				$ 150,000
YEAR 1
NO BEGINNING INVENTORY
ACTUAL COSTS OF PRODUCTION EQUALS ABOVE MANUFACTURING COSTS
PURCHASE DIRECT MATERAILS OF				$ 200,000
INCUR SELLING AND ADMIN COSTS OF				$ 80,000
#UNITS PRODUCED				10000
# UNITS SOLD				9000
SALES PRICE OF UNITS SOLD				$ 100
YEAR 2
THERE IS BEGINNIN GINVENTORY
ACTUAL COSTS OF PRODUCTION EQUALS ABOVE MANUFACTURING COSTS
PURCHASE DIRECT MATERAILS OF				$ 160,000
INCUR SELLING AND ADMIN COSTS OF				$ 80,000
#UNITS PRODUCED				8000	UNITS
# UNITS SOLD				9000	UNITS
SALES PRICE OF UNITS SOLD				$ 100
2. CALCULATE THE NET INCOME FOR BOTH YEARS UNDER BOTH COSTING METHODS