Throughput Costing (continuation of 9-32)

1. Prepare an income statement under throughput costing for the year ended December 31, 2017 for Garvis Company

2. Reconcile the different between the contribution margin and throughput margin for Garvis in 2017. Then reconcile the operating income between variable costing and throughput costing for Garvis in 2017.

3. Advocates of throughput costing say it provides managers less incentive to produce for inventory than either variable costing or, especially, absorption costing. Do you agree? Why or why not? Under what circumstances might you recommend that Garvis use throughput costing?

 

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