Throughput Costing counts only unit-level costs as the cost of a product or service. All other costs of resources used are counted as operating costs (or expenses). The throughput (under throughput costing) is sales revenue minus all unit-level spending for direct costs.

Timing is the key in distinguishing between absorption, variable, and throughput costing. All manufacturing costs will ultimately be expensed under all three methods. Under throughput costing, only the unit-level spending for direct costs are included in the product cost. All other committed costs are expensed as period costs during the period in which they are incurred. Under variable costing, the fixed manufacturing-overhead costs are expensed during the period in which they are incurred. Under absorption costing, fixed manufacturing-overhead costs are held in inventory as product costs until the period during which the units are sold. Then those costs flow into cost-of-goods-sold expense.
( Glossary)

Other Definitions

Throughput Costing – treats all costs except direct materials as period costs. Normally, only direct materials costs are inventoriable
(Income Effect of Alternate Inventory Costing Method)

Throughput Costing – assigns costs based on time in system
(Tom Atkin’s Sonoma State University Business 316 Class; Production Operations Management; Intro Powerpoint Presentation)

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J. Jerrald Hayes
I am ex-architectural woodworker and general contractor turned IT, Business and Project Management consultant, software developer wannabe senior division triathlete and ski racer, Yankee fan and founder of, 360 Difference, and now too.
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