PFA's throughput costing operating income will be
A) $270
B) $600
C) $400
D) None of the above

Question

Quizplus · Accepted Answer

Throughput costing operating income is equal to throughput margin multiplied by throughput. Throughput margin is equal to sales revenue minus variable costs divided by throughput. Throughput is equal to sales revenue minus variable costs. In this case, sales revenue is $1,000, variable costs are $400, and throughput is $600. Therefore, throughput margin is ($1,000 - $400) / $600 = 1.00. Operating income is equal to throughput margin multiplied by throughput, which is 1.00 * $600 = $600.

PFA's Throughput Costing Operating Income Will Be