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Chapter 8 Solutions

James R. Martin, Ph.D., CMA
Professor Emeritus, University of South Florida

Chapter 8 | MAAW's Textbook Table of Contents

SOLUTION 8-1

1. D  2. F  3. B  4. A  5. C  6. E

SOLUTION 8-2

1. A 2. B 3. B 4. A 5. A 6. A 7. B 8. B 9. A 10. B

SOLUTION 8-3

1. A 2. B 3. B 4. A 5. B 6. B 7. A 8. B 9. A 10. B

SOLUTION 8-4

All of the receiving activities and cost would be reduced or eliminated because the vendors deliver raw materials to the plant floor in shop ready containers. There is no need to unpack, count, inspect and move the materials and related paperwork.

Most of the moving and handling activities and cost would be eliminated when the production facilities and equipment are rearranged from a functional layout to a cellular layout. Also there is little need for a warehouse.

Most of the warehouse activities and cost are eliminated because there is little or no inventory to store.

SOLUTION 8-5

1. J   2. T   3. T   4. J   5. T   6. T    7. J    8. T    9. J   10. T 

Solution to Problem 8-6

Solution to Problem 8-6 Part 2

Solution to Problem 8-6 Part 3

Solution to Problem 8-6 Part 4

SOLUTION 8-7

1. b     2. d     3. e     4. a     5. e     6. a     7. e     8. e     9. d     10. a     11. b     12. d

SOLUTION 8-8

1. e NIBT = Sales - COGS - S&A = $720,000 - $360,000* - $80,000 = $280,000

* COGS = BFG + COGM - EFG = 0 + ($20)(20,000) - (20)(2,000) = $360,000

2. d NIBT = Sales - COGS - VS&A - Fixed costs = $720,000 - $252,000* - $30,000 - $170,000 = $268,000

* COGS = BFG + COGM - EFG = 0 + ($14)(20,000) - (14)(2,000) = $252,000

Note: NIBT is $12,000 greater under Absorption costing because ($6)(2,000) = $12,000 fixed overhead is deferred in the ending inventory. Or to say it another way, $12,000
more is expensed under direct costing than absorption costing.

3. c NIBT = Sales - COGS* - Operating Expenses = $720,000 - 144,000 - 320,000** = $256,000

* COGS = BFG + COGM - EFG = 0 + ($8)(20,000) - ($8)(2,000) = 144,000

**DL + VO + FO + S&A = ($6)(20,000) +120,000 + 80,000 = $320,000

Note: NIBT is $12,000 greater under Direct costing because ($6)(2,000) = $12,000 direct labor and variable overhead is deferred in the ending inventory. Or to say it another way, $12,000 more is expensed under throughput costing than direct costing. NIBT is $24,000 greater under Absorption costing because $24,000 more is expensed under throughput costing. This includes fixed overhead of $12,000 + DL and VO of $12,000.