Question - Great Outdoze, Inc. manufactures high-quality sleeping bags, which sell for $130 each. The variable costs of production are as follows:
Direct material ..................................... $40
Direct labor.......................................... $22
Variable manufacturing overhead......... $16
Budgeted fixed overhead in 20x4 was $400,000 and budgeted production was 25,000 sleeping bags. The year's actual production was 25,000 units, of which 22,000 were sold. Variable selling and administrative costs were $2 per unit sold; fixed selling and administrative costs were $60,000.
Assume that direct material is the only unit-level manufacturing cost.
The company has committed its spending for direct labor and overhead (variable and fixed).
Give an argument for and against throughput costing.