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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
