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)Both A and C are correct.

Question

Quizplus · Accepted Answer

Throughput costing maintains that fixed manufacturing costs are related to the capacity to produce rather than to the actual production of specific units. Therefore, only variable manufacturing costs are inventoried under this approach. This is because advocates of throughput costing believe that the goal of production is to maximize throughput (i.e., the rate at which a company generates money through sales), and that inventory levels should be kept low to avoid tying up resources that could be used to generate more throughput. Design costs are not included in inventory under throughput costing.

Advocates of Throughput Costing Maintain That