Throughput costing provides more incentive to produce for inventory than does absorption costing.

Question

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Throughput costing focuses on maximizing throughput (revenue minus direct materials cost) rather than absorption costing which includes a portion of fixed manufacturing overhead in product costs. This means that under throughput costing, producing for inventory is discouraged as it ties up resources and may not result in immediate revenue.

Throughput Costing Provides More Incentive to Produce for Inventory Than