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, TABLE OF CONTENTS
Solutions Manual: Fundamental Managerial Accounting Concepts,
2025 Release
Authors: Christopher Edmonds, Mark Edmonds, Jennifer Edmonds
ST
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Chapter 1. Management Accounting and Corporate Governance
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Chapter 2. Behavior, Operating Leverage, and Profitability Analysis
Chapter 3. Analysis of Cost, Volume, and Pricing to Increase Profitability
Chapter 4. Cost Accumulation, Tracing, and Allocation
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Chapter 5. Cost Management in an Automated Business Environment: ABC, ABM, and TQM
Chapter 6. Relevant Information for Special Decisions
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Chapter 7. Planning for Profit and Cost Control
Chapter 8. Performance Evaluation
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Chapter 9. Responsibility Accounting
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Chapter 10. Planning for Capital Investments
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Chapter 11. Product Costing in Service and Manufacturing Entities
Chapter 12. Job-Order, Process, and Hybrid Costing Systems
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Chapter 13. Financial Statement Analysis
Chapter 14. Statement of Cash Flows
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, Managerial – Chapter 1 – Solutions Manual
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
ST
nonfinancial data, which pertains more to the sub-units of the
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organization, that is current and future oriented, and that is
designed primarily to meet the information needs of insiders.
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2. The value-added principle means that management accountants
EK
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
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accounting reports for budgeting and product costing but would
not be allowed by financial regulations in financial accounting.
3. Sustainability and Environmental Reporting
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4.
ED
Both financial and managerial accountants need cost information
about the company’s products and services. In managerial
AP
accounting cost information is useful in product pricing decisions
and is an essential part of cost control (comparing actual product
M
cost to budgeted product cost to assess needed improvement) and
performance evaluation (assess managers’ success in controlling
PR
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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
IA
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impact the decisions of not only managers but also outsiders such
as investors, creditors, and taxing authorities. Product costing
UV
information in managerial accounting can affect the product’s
selling price as well as management’s decisions as to whether cost
ED
correction changes are needed.
5. Costs are assets used in the process of earning revenue but not all
ST
costs of the earning process are used in the same period in which
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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
1-1
© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw
, Managerial – Chapter 1 – Solutions Manual
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
ST
those products sold should be expensed as cost of goods sold.
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7. Product costs associated with goods that have not been sold are
recorded in the account called inventory. Inventory cost is shown
UV
on the balance sheet as an asset. The amount of total assets and
EK
net income will be higher if a product cost is classified as an asset
than if it is expensed. Product cost associated with goods that have
been sold should be recorded in the account called cost of goods
GE
IA
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
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classified as an asset. ED
8. An indirect product cost cannot be easily or economically traced to
a specific product. Product costs that would be considered indirect
AP
include costs such as production supplies, salaries of production
M
supervisors, and depreciation, rent, and utilities on factory facilities.
9. Product costs are all costs incurred to obtain a product or provide a
PR
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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
IA
OV
and most are expensed in the period in which the associated
economic sacrifice is made. A product cost would be the cost of
UV
direct materials used in the production of a product. A period cost
would be rent on administrative facilities.
ED
10. The effects of cost classification on the financial statements can
have important implications with respect to the following:
ST
(1) The availability of financing - Investors and creditors use
??
financial statement data to predict businesses’ future
earnings. Favorable financial statements provide evidence of
favorable future performance whereas unfavorable financial
statements are an indication of possible poor future financial
1-2
© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw
EK ED
GE OV
ED PR
AP
M
?_
?_ IA
IA UV
UV ST
ST
, TABLE OF CONTENTS
Solutions Manual: Fundamental Managerial Accounting Concepts,
2025 Release
Authors: Christopher Edmonds, Mark Edmonds, Jennifer Edmonds
ST
??
Chapter 1. Management Accounting and Corporate Governance
UV
EK
Chapter 2. Behavior, Operating Leverage, and Profitability Analysis
Chapter 3. Analysis of Cost, Volume, and Pricing to Increase Profitability
Chapter 4. Cost Accumulation, Tracing, and Allocation
GE
IA
Chapter 5. Cost Management in an Automated Business Environment: ABC, ABM, and TQM
Chapter 6. Relevant Information for Special Decisions
?_
Chapter 7. Planning for Profit and Cost Control
Chapter 8. Performance Evaluation
ED
Chapter 9. Responsibility Accounting
AP
Chapter 10. Planning for Capital Investments
_M
Chapter 11. Product Costing in Service and Manufacturing Entities
Chapter 12. Job-Order, Process, and Hybrid Costing Systems
PR
Chapter 13. Financial Statement Analysis
Chapter 14. Statement of Cash Flows
A?
OV
VI
ED
U
ST
? ?
, Managerial – Chapter 1 – Solutions Manual
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
ST
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.
UV
2. The value-added principle means that management accountants
EK
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
GE
IA
accounting reports for budgeting and product costing but would
not be allowed by financial regulations in financial accounting.
3. Sustainability and Environmental Reporting
?_
4.
ED
Both financial and managerial accountants need cost information
about the company’s products and services. In managerial
AP
accounting cost information is useful in product pricing decisions
and is an essential part of cost control (comparing actual product
M
cost to budgeted product cost to assess needed improvement) and
performance evaluation (assess managers’ success in controlling
PR
?_
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
IA
OV
impact the decisions of not only managers but also outsiders such
as investors, creditors, and taxing authorities. Product costing
UV
information in managerial accounting can affect the product’s
selling price as well as management’s decisions as to whether cost
ED
correction changes are needed.
5. Costs are assets used in the process of earning revenue but not all
ST
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
1-1
© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw
, Managerial – Chapter 1 – Solutions Manual
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
ST
those products sold should be expensed as cost of goods sold.
??
7. Product costs associated with goods that have not been sold are
recorded in the account called inventory. Inventory cost is shown
UV
on the balance sheet as an asset. The amount of total assets and
EK
net income will be higher if a product cost is classified as an asset
than if it is expensed. Product cost associated with goods that have
been sold should be recorded in the account called cost of goods
GE
IA
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. ED
8. An indirect product cost cannot be easily or economically traced to
a specific product. Product costs that would be considered indirect
AP
include costs such as production supplies, salaries of production
M
supervisors, and depreciation, rent, and utilities on factory facilities.
9. Product costs are all costs incurred to obtain a product or provide a
PR
?_
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
IA
OV
and most are expensed in the period in which the associated
economic sacrifice is made. A product cost would be the cost of
UV
direct materials used in the production of a product. A period cost
would be rent on administrative facilities.
ED
10. The effects of cost classification on the financial statements can
have important implications with respect to the following:
ST
(1) The availability of financing - Investors and creditors use
??
financial statement data to predict businesses’ future
earnings. Favorable financial statements provide evidence of
favorable future performance whereas unfavorable financial
statements are an indication of possible poor future financial
1-2
© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw
