Throughput costing treats all costs as period expenses except for direct materials. It is also called super-variable costing. It is very suitable for those companies where labor and overheads are fixed costs. Assembly-line and continuous processes that are highly automated are most likely to meet this criterion.

What are the advantages of throughput costing?

The main advantage of throughput accounting is that it yields the best short-term incremental profits if it is religiously followed when making production decisions.

What is a throughput cost?

Throughput is the revenues generated by a production process, minus all completely variable expenses incurred by that process. In most cases, the only completely variable expenses are direct materials and sales commissions.