Under super-variable costing, all costs except direct materials are expensed in the period ________?
Show answer Hide answer
Answer: A. of incurring
Explanation
Super-variable costing (throughput costing) expenses all production costs except direct materials immediately in the period incurred. Under this extreme form of variable costing, direct labor and overhead are treated strictly as period expenses. Only direct material costs are capitalized into inventory valuations under pure throughput costing systems. Super-variable costing is also known in management accounting literature as throughput costing. This method aligns with theory of constraints thinking, which views throughput margin as the primary profit driver. Traditional absorption costing capitalizes all manufacturing costs, whereas throughput costing capitalizes only direct materials.
Firms utilizing theory of constraints management philosophy often adopt throughput costing for internal reporting. Expensing labor and overhead immediately removes incentives for managers to build up excess inventory stocks. Throughput accounting focuses attention on maximizing output speed through bottleneck operations rather than labor efficiency. Option A is correct because non-material production costs are expensed in the period of incurring. Expensing costs in the period of sale describes standard absorption or variable costing inventory matching principles. Period of manufacturing relates to production timing rather than the specific super-variable expensing rule.
- Subject
- Accounting and Finance
- Category
- Accounting
- Topic
- —
- Difficulty
- medium
Related questions
Q1. When using quantitative analysis to estimate a cost function, the final step is to _____________?
Show answer Hide answer
Answer: B. evaluate cost driver
The final step in estimating a cost function using quantitative analysis is evaluating the selected cost driver. Analysts assess the economic plausibility, goodness of fit, and significance of the chosen cost driver. Eva...
Q2. In a regression equation, the evaluation criteria examine the significance of _________?
Show answer Hide answer
Answer: A. independent variable
Evaluation criteria in a regression equation test whether the independent variables are statistically significant in explaining the dependent variable. Analysts examine p-values and t-statistics to determine if an indepe...
Q3. For strategy formulation, the forces that must be analyzed to understand the industry include ________?
Show answer Hide answer
Answer: D. all of above
Industry analysis for strategy formulation requires evaluating competitive forces, including potential market entrants, suppliers, and customers. Michael Porter's five forces framework mandates analyzing all competitive...
Q4. In fixed overhead cost variance analysis, the fixed overhead does not include ______________?
Show answer Hide answer
Answer: A. efficiency variance
Efficiency variance is a variable cost concept used in flexible budget performance reports and is excluded from fixed overhead. Fixed overhead variance analysis focuses exclusively on spending and production volume diffe...
Q5. Within the budget hierarchy, material handling costs are classified as ___________?
Show answer Hide answer
Answer: B. batch level cost
Material handling costs vary directly with the number of production batches processed rather than the number of individual units made. Moving materials for a batch requires setup and transport effort whether the batch co...
Q6. Under normal costing, the budgeted rate is multiplied by the actual quantity of the allocation base used to calculate ___________?
Show answer Hide answer
Answer: B. manufacturing overhead applied
Normal costing applies overhead to production by multiplying a predetermined budgeted rate by the actual quantity of the allocation base used. This approach smooths out seasonal fluctuations in overhead costs. Cost accou...