Throughput costing

Last updated: 29.03.2016

Throughput costing is a type of costing method under which only direct material costs are included to the value of the product (or job, contract, batch, process, etc.). Other costs are expensed when incurred.

It is not acceptable for inventory valuation either under IAS 2 or US GAAP but it may be useful as management accounting tool and/or for decision-making in companies with highly automated production processes where most labor costs are fixed.

 

More about other costing methods and approaches here.



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