Stuvia.com - The Marketplace to Buy and Sell your Study Material
Solution Manual
Fundamental Managerial Accounting Concepts 10th
Edition Thomas Edmond All Chapters Complete Guide
Grade A+ Exam Questions Answers Study Resource
,Answers to questions - chapter 1
1. Financial accounting deals with regulated, historical, financial information that pertains to the whole
company and is designed primarily to meet the information needs of outsiders. Managerial
accounting is concerned with unregulated financial, economic, and nonfinancial data, which pertains
more to the sub-units of the organization, that is current and future oriented, and that is designed
primarily to meet the information needs of insiders.
2. The value-added principle means that management accountants are free to engage in any information
gathering and reporting activity so long as the activity adds value in excess of its cost. Estimates of
future product costs are permissible in managerial accounting reports for budgeting and product
costing but would not be allowed by financial regulations in financial accounting.
3. The two dimensions of the tqm program are: (1) management should follow a continuous, systematic
problem-solving philosophy that encourages achievement of zero defects in production and engages
all employees to eliminate waste and errors and to simplify the design and delivery of products and
services to customers, and (2) organizations need a strong commitment to customer satisfaction. Tqm
is being used in business to maintain profitability in an increasingly competitive global market. In
this environment, profit margins are tight, and therefore, inefficiencies can more easily erode
business profits. To eliminate waste, errors, and dissatisfied customers, informationmust be timely
and relevant in order to prevent or discover and correct mistakes immediately.
2
,4. Both financial and managerial accountants need cost information about the company’s products and
services. In managerial accounting cost information is useful in product pricing decisions and is an
essential part of cost control (comparing actual product cost to budgeted product cost to assess
needed improvement) and performance evaluation (assess managers’ success in controlling and
eliminating unnecessary cost). In financial accounting, cost information about the product is needed
to determine ending inventory on the balance sheet and cost of goods sold on the income statement.
Product costing in financial accounting can impact the decisions of not only managers but also
outsiders such as investors, creditors, and taxing authorities. Product costing information in
managerial accounting can affect the product’s selling price as well as management’s decisions as to
whether cost correction changes are needed.
5. Costs are assets used in the process of earning revenue but notall costs of the earning process are
used in the same period in which they are incurred. Therefore, a cost that is used in the process of
earning revenue is recorded as an expense (e.g. Administrative salaries and product cost for products
sold) and a cost that has future benefit in the earning process is recorded as an asset in the period that
it is incurred.
6. The cash paid to production workers has not been used to produce revenue but to produce inventory.
The revenue is earned when the inventory is sold at which time the cost of salaries associated with
those products sold should be expensed as cost of goods sold.
3
, 7. Product costs associated with goods that have not been sold are recorded in the account called
inventory. Inventory cost is shown on the balance sheet as an asset. The amount of total assets and
net income will be higher if a product cost is classified as an assetthan if it is expensed. Product cost
associated with goods that have been sold should be recorded in the account called cost of goods
sold. Cost of goods sold is an expense shown on the income statement. The amount of total assets
and net income will be lower if a product cost is classified as an expense as opposed to being
classified as an asset.
8. An indirect product cost cannot be easily or economically traced to a specific product. Product
costs that would be considered indirect include costs such as production supplies, salaries
ofproduction supervisors, and depreciation, rent, and utilities onfactory facilities.
9. Product costs are all costs incurred to obtain a product or provide a service. These costs are treated as
assets, recorded in inventory, and expensed when the associated products are sold. Period costs are
all costs not associated with a product. They are associated with the general, selling, and
administrative functions of the business and most are expensed in the period in which the associated
economic sacrifice is made. A product cost would be the cost of direct materials used in the
production of a product. A period cost would be rent on administrative facilities.
4
Solution Manual
Fundamental Managerial Accounting Concepts 10th
Edition Thomas Edmond All Chapters Complete Guide
Grade A+ Exam Questions Answers Study Resource
,Answers to questions - chapter 1
1. Financial accounting deals with regulated, historical, financial information that pertains to the whole
company and is designed primarily to meet the information needs of outsiders. Managerial
accounting is concerned with unregulated financial, economic, and nonfinancial data, which pertains
more to the sub-units of the organization, that is current and future oriented, and that is designed
primarily to meet the information needs of insiders.
2. The value-added principle means that management accountants are free to engage in any information
gathering and reporting activity so long as the activity adds value in excess of its cost. Estimates of
future product costs are permissible in managerial accounting reports for budgeting and product
costing but would not be allowed by financial regulations in financial accounting.
3. The two dimensions of the tqm program are: (1) management should follow a continuous, systematic
problem-solving philosophy that encourages achievement of zero defects in production and engages
all employees to eliminate waste and errors and to simplify the design and delivery of products and
services to customers, and (2) organizations need a strong commitment to customer satisfaction. Tqm
is being used in business to maintain profitability in an increasingly competitive global market. In
this environment, profit margins are tight, and therefore, inefficiencies can more easily erode
business profits. To eliminate waste, errors, and dissatisfied customers, informationmust be timely
and relevant in order to prevent or discover and correct mistakes immediately.
2
,4. Both financial and managerial accountants need cost information about the company’s products and
services. In managerial accounting cost information is useful in product pricing decisions and is an
essential part of cost control (comparing actual product cost to budgeted product cost to assess
needed improvement) and performance evaluation (assess managers’ success in controlling and
eliminating unnecessary cost). In financial accounting, cost information about the product is needed
to determine ending inventory on the balance sheet and cost of goods sold on the income statement.
Product costing in financial accounting can impact the decisions of not only managers but also
outsiders such as investors, creditors, and taxing authorities. Product costing information in
managerial accounting can affect the product’s selling price as well as management’s decisions as to
whether cost correction changes are needed.
5. Costs are assets used in the process of earning revenue but notall costs of the earning process are
used in the same period in which they are incurred. Therefore, a cost that is used in the process of
earning revenue is recorded as an expense (e.g. Administrative salaries and product cost for products
sold) and a cost that has future benefit in the earning process is recorded as an asset in the period that
it is incurred.
6. The cash paid to production workers has not been used to produce revenue but to produce inventory.
The revenue is earned when the inventory is sold at which time the cost of salaries associated with
those products sold should be expensed as cost of goods sold.
3
, 7. Product costs associated with goods that have not been sold are recorded in the account called
inventory. Inventory cost is shown on the balance sheet as an asset. The amount of total assets and
net income will be higher if a product cost is classified as an assetthan if it is expensed. Product cost
associated with goods that have been sold should be recorded in the account called cost of goods
sold. Cost of goods sold is an expense shown on the income statement. The amount of total assets
and net income will be lower if a product cost is classified as an expense as opposed to being
classified as an asset.
8. An indirect product cost cannot be easily or economically traced to a specific product. Product
costs that would be considered indirect include costs such as production supplies, salaries
ofproduction supervisors, and depreciation, rent, and utilities onfactory facilities.
9. Product costs are all costs incurred to obtain a product or provide a service. These costs are treated as
assets, recorded in inventory, and expensed when the associated products are sold. Period costs are
all costs not associated with a product. They are associated with the general, selling, and
administrative functions of the business and most are expensed in the period in which the associated
economic sacrifice is made. A product cost would be the cost of direct materials used in the
production of a product. A period cost would be rent on administrative facilities.
4
