Fundamental Managerial Accounting Concepts 9th Edition Edmonds Solutions Manual

Fundamental Managerial Accounting
Concepts 9th Edition Edmonds

Solutions Manual
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Fundamental Managerial Accounting Concepts 9th Edition Edmonds Solutions Manual
Managerial 9e – Chapter 1 – Exercises and Problems – Set B
Exercise 1-1B
Managerial Accounting Financial Accounting

a. X
b. X
c. X
d. X
e. X
f. X
g. X
h. X
i. X
j. X
1-42
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Exercise 1-2B
Selling, General, and

Product Cost Administrative Cost
a. X
b. X
c. X
d. X
e. X
f. X
g. X
h. X
i. X
j. X
1-43
Exercise 1-3B
Product / Asset /
Cost Category SG&A Expense
Cost of merchandise shipped to customers Product Expense
Depreciation on vehicles used by salespeople SG&A Expense
Wages of administrative building security guards SG&A Expense
Supplies used in the plant manager's office Product Asset
Purchase of computers for the accounting department SG&A Asset
Depreciation on computers used in factory Product Asset
Natural gas used in the factory Product Asset
Cost of television commercials SG&A Expense
Wages of factory workers Product Asset
Paper and ink cartridges used in the cashier's office SG&A Expense
Raw material used to make products Product Asset
Lubricant used to maintain factory equipment Product Asset
Cost of a delivery truck SG&A Asset
Cash dividend to stockholders Neither Neither
1-44
Exercise 1-4B
Assets = Liab. + Equity Rev. – Exp. = Net Inc.

1. NA I D NA I D
2. I I NA NA NA NA
1-45
Exercise 1-5B
Assets = Equity Income Statement

Event Prepaid Com. Ret.
No. Cash + Insurance + Inventory = Stk. + Ear. Rev. – Exp. = Net Inc.
1. NA D NA NA D NA I D
2. NA D I NA NA NA NA NA
1-46
Exercise 1-6B
a. Depreciation costs that would be classified as selling, general, and
administrative expense are the following:
Depreciation of a building for finished product display $24,000
Depreciation of delivery trucks 18,000
Depreciation of furniture used in the president's office 15,000
Depreciation of elevators in administrative buildings 20,000
Total $77,000
b. Depreciation costs that would be classified as product costs are the

following:
Depreciation of factory buildings $ 75,000
Depreciation of computers used in manufacturing 12,000
Depreciation of forklifts used in the factory 30,000
Depreciation of factory machinery 36,000
Total $ 153,000
Since 2,000 units of 3,000 products finished were sold, 2/3 (2,000 ÷
3,000) of the product cost would be included in cost of goods sold.
Therefore, the total depreciation cost that would be included in cost of
goods sold is:
$153,000 x 2/3 = $102,000
1-47
Exercise 1-7B
Assets = Equity Income Statement

Event Manuf. Adm. Com. Ret.
No. Cash + Inventory + Equip. + Offices = Stk. + Ear. Rev. – Exp. = Net Inc.
1. I + NA + NA + NA = I + NA NA – NA = NA
2. D + I + NA + NA = NA + NA NA – NA = NA
3. D + NA + NA + NA = NA + D NA – I = D
4. D + I + NA + NA = NA + NA NA – NA = NA
5. NA + NA + NA + D = NA + D NA – I = D
6. NA + I + D + NA = NA + NA NA – NA = NA
7. I + NA + NA + NA = NA + I I – NA = I
8. NA + D + NA + NA = NA + D NA – I = D
1-48
Exercise 1-8B
a.
Raw materials purchased and used $ 8,100
Wages of production workers 6,500
Depreciation on manufacturing equipment 3,400
Total product cost $18,000
b. Cost of inventory per unit = $18,000 ÷ 6,000 = $3
Ending inventory in units = 6,000 – 4,800 = 1,200
Cost of ending inventory = $3 x 1,200 = $3,600
c. Cost of goods sold = $3 x 4,800 = $14,400
1-49
Exercise 1-9B
Item Upstream Midstream Downstream

Telephone cost of a manufacturing plant X
Steering wheel used to assemble a car X
Wages of a manufacturing plant X
Cost of product warranty X
Cost of researching a cancer treatment drug X
Plant manager’s salary X
Sales commissions X
Cost of pursuing FDA’s approval on a new X
drug
Cost of product advertisement X
Cost of providing Internet service in a plant X
Year-end bonus paid to factory foremen X
Shipping manager’s salary X
Cost of research and development X
Depreciation on vehicles used by X
salespersons
Depreciation on vehicles used in a plant X
1-50
Exercise 1-10B
a. The $35,000,000 of research and development costs is an upstream

cost. Packaging, shipping, and sales commissions are downstream
costs.
b. Cost of goods sold: $20 x 600,000 = $12,000,000

Ending inventory: $20 x 200,000 = $4,000,000
c.
Upstream cost per unit, $35,000,000 ÷ 5,000,000 $ 7
Manufacturing cost per unit 20
Downstream costs per unit 3
Total cost 30
Plus: 40% profit margin, $30 x 40% 12
Price $42
d.
Income Statement
Sales revenue ($42 X 600,000) $ 25,200,000
Cost of goods sold ($20 X 600,000) (12,000,000)
Gross margin 13,200,000
Research and development expense (35,000,000)
Selling expenses ($3 x 600,000) (1,800,000)
Net income (Loss) $(23,600,000)
e. GAAP requires expensing research and development costs in the

period in which they are incurred. However, Hutton expects the R&D
costs to result in overall Allergone sales of 5,000,000 units in Year 1
and future years. The income statement for Year 1 recognizes revenue
from selling 600,000 units while recognizing the entire R&D cost as
expense. No R&D cost will be recognized on future income statements.
The Year 1 net loss will be more than offset by positive net incomes
from future Allergone sales.
1-51
Exercise 1-11B
a. The three components of product cost incurred in producing cakes are

direct materials such as flour, sugar, and eggs; direct labor such as
Susan’s effort to mix ingredients together and bake them into cakes;
and manufacturing overhead such as the cost of an oven, electric
power cost, and the cost of detergent to wash pans.
b. Measuring product cost for a merchandising company, such as a retail

store, is relatively easy. It includes the vendor’s invoice price, freight
cost, and other costs necessary to get the inventory ready to sell.
Measuring product cost for a manufacturing entity requires a more
complex system. A manufacturing enterprise must classify its costs
as product costs or period costs. It must accumulate product costs
(direct materials, direct labor, and manufacturing overhead). It must
then classify the cost of sold products as expense and unsold products
as inventory, an asset.
1-52
Exercise 1-12B
a. Event No. 1 represents the expiration of insurance on a factory building

because the recognition decreases prepaid insurance and increases
inventory, both assets on the balance sheet. The expiration of
insurance on a factory building does not affect the income statement
until the products made in the factory are sold.
b. The cost of insuring a factory is among the costs necessary to produce

inventory. The expiration of factory insurance, therefore, is an asset
exchange: the asset prepaid insurance is exchanged for the asset
inventory, affecting only the balance sheet. The expiration of insurance
on an administrative building, however, is an asset use transaction
which increases expense on the income statement. No asset that will
benefit future periods is produced in the administrative building.
1-53
Exercise 1-13B
Increases in inventory without corresponding increases in sales
revenue often signal increasing working capital costs and a decreasing
rate of cash inflows. More cash has been invested in inventory, but the
inventory has not been sold and therefore converted back into cash.
With a just-in-time inventory management system (JIT system), Fargo
would only acquire inventory when it is needed for sale, eliminating its
costly investment in idle inventory and speeding up its cash flow.
1-54
Exercise 1-14B
a.
Income Statement
Sales revenue ($30 x 900) $27,000
Cost of goods sold ($20 x 900) (18,000)
Gross margin 9,000
Waste due to excess inventory ($20 x 100) (2,000)
Net income $ 7,000
b.
Income Statement
Sales revenue ($30 x 1,000) $30,000
Cost of goods sold ($20 x 1,000) (20,000)
Net income $10,000
The opportunity cost of lost sales: ($30 – $20) x 100 = $1,000
c. If Denise could arrange to order only the number of yearbooks

actually needed, the school could eliminate potential losses from
either the waste attributable to unsold yearbooks or the opportunity
cost of lost sales from having too few yearbooks available. For
example, the yearbook staff could request that students, faculty
members, and staff members who want to purchase yearbooks
complete order forms 10 days in advance of the school fair day. On
that day, the yearbook staff could set up a yearbook stand to receive
customer payments and deliver yearbooks at the same time.
1-55
Exercise 1-15B
a. The new inventory system is an approximate just-in-time system
since it does not eliminate all inventory.
b. Reduced cost of inventory: $12,000 – $2,000 = $10,000
Finance cost: $10,000 x 9% = $900
Total eliminated inventory holding cost: $5,000 + $900 = $5,900
1-56
Exercise 1-16B
a. While the entire $1,500,000 of upstream research and development cost
should have been expensed immediately, the CFO put the $1,500,000
into an inventory account. Since some of the inventory was not sold,
some of the R&D cost is still in the inventory account. The
computations are shown below:
$1,500,000
Misclassified cost per unit = ––––––––– = $300 per unit
5,000
Number of units in ending inventory:
Inventory Completed 5,000

Less Inventory Sold (4,000)
Ending Inventory 1,000
The portion of R&D cost still in ending inventory is $300,000 ($300 x 1,000 units).
Instead of being in the inventory account, the $300,000 should have been
expensed. As a result, assets, retained earnings (equity), and net income
are overstated by $300,000. Expenses are understated by the same
amount. Revenue and liabilities are not affected.
b. The CFO’s motive was probably that he was under pressure to present
an inflated amount of net income. Executive compensation is
frequently tied to net income or stock price which is related by net
income. Further, a strong balance sheet and income statement make
borrowing money or selling stock easier, because the company
appears more attractive to a potential lender or investor.
1-57
Exercise 1-17B
Had the Sarbanes-Oxley Act been in effect, HealthSouth would have been
required to establish a hotline and other mechanisms for the anonymous
reporting of fraudulent activities. The company also would have been
prohibited from applying any form of punishment to whistleblowers such
as Greg Madrid.
1-58
Exercise 1-18B
The process of shampooing a customer's hair before cutting is nonvalue-

added if the customer’s hair isn’t dirty. The barber could change shop policy
to offer a reduced price haircut to customers who have just washed their hair
before coming to the barbershop.
1-59
Problem 1-19B
Information Item Financial Managerial

Accounting Accounting
Cost per unit of individual products x
Profit margin of individual products x
Annual report filed with SEC x
Cash flow of the company as a whole x
Income statement prepared according to GAAP x
Balance sheet prepared according to market-value x
estimates
Estimated profit of a new product ready to be launched x
Footnote disclosures required by FASB x
Cost analysis provided to production manager x
Facility utilization report provided to company president x
Financial figures released to press x
Financial statements provided to creditors x
Report on employee turnover x
Cost of goods sold as reported according to GAAP x
1-60
Chapter 1 - Management Accounting and Corporate Governance
Problem 1-20B
The following horizontal financial statements model is not required in the problem. It is provided to
show the process of computation.
Event Assets = Equity Income Statement

Office Manuf. Common
No. Cash + Invent. + Furn.* + Equip*. = Stock + Ret. Ear. Rev. – Exp. = Net Inc.
1. 98,000 + + + = 98,000 + – =
2a. (28,000) + + 28,000 + = + – =
2b. + + (7,000) + = + (7,000) – 7,000 = (7,000)
3a. (58,000) + + + 58,000 = + – =
3b. + 9,000 + + (9,000) = + – =
4. (20,000) + + + = + (20,000) – 20,000 = (20,000)
5. (27,000) + 27,000 + + = + – =
6. (39,000) + 39,000 + + = + – =
7a. 150,000 + + + = + 150,000 150,000 – = 150,000
7b. + (62,500) + + = + (62,500) – 62,500 = (62,500)
Total 76,000 + 12,500 + 21,000 + 49,000 = 98,000 + 60,500 150,000 – 89,500 = 60,500
*Record accumulated depreciation as negative amounts under these columns.
1-61
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Problem 1-20B (continued)
a.
Direct materials $39,000

Direct labor 27,000
Manufacturing overhead 9,000*
Total product cost 75,000
Divided by  12,000
Average cost per unit $6.25
* Depreciation of manufacturing equipment:

($58,000  $4,000)  6 = $9,000
b. Cost of goods sold: $6.25 x 10,000 = $62,500
c. Ending inventory: $6.25 x (12,000  10,000) = $12,500
d. $60,500
e. $60,500
f. $76,000* + $12,500 + $21,000 + $49,000= $158,500
*$98,000 – $28,000 – $58,000 – $20,000 – $27,000 – $39,000 + ($15 x 10,000)

= $76,000
1-62
Problem 1-21B
Event Assets = Equity Income Statement

Manuf. Office Com.
No. Cash + Invent. + Equip*. + Furn.* = Stk. + Ret. Ear. Rev. – Exp. = Net Inc.
1. 87,000 + + + = 87,000 + – =
2. (17,000) + 17,000 + + = + – =
3. (7,000) + + + = + (7,000) – 7,000 = (7,000)
4. (10,000) + 10,000 + + = + – =
5a. (12,000) + + + 12,000 = + – =
5b. + + + (1,500) = + (1,500) – 1,500 = (1,500)
6a. (18,000) + + 18,000 + = + – =
6b. + 3,000 + (3,000) + = + – =
7a. 58,000 + + + = + 58,000 58,000 – = 58,000
7b. + (26,000) + + = + (26,000) – 26,000 = (26,000)
Total 81,000 + 4,000 + 15,000 + 10,500 = 87,000 + 23,500 58,000 – 34,500 = 23,500
*Record accumulated depreciation as negative amounts under these columns.
1-63
Problem 1-22B
Fuzhou Company
Income Statement for Year 1 Balance Sheet as of 12/31/Year 1
Sales revenue $29,700 Assets
1
Cost of goods sold (22,000) Cash3 $50,700
1
Gross margin 7,700 Fin. goods inventory 2,000
Administrative expense2 (5,000) Total assets $52,700
Net income $2,700
Equity
Common stock $50,000
Retained earnings 2,700
Total equity $52,700
1
The product costs are $10,500 for materials, $8,600 for labor, and
$4,900 for overhead. Accordingly, $24,000 (i.e., $10,500 + $8,600 +
$4,900) was used to make the 1,200 units of product. The cost per
unit is $20 (i.e. $24,000 ÷ 1,200 units). Since 1,100 units were sold,
ending inventory will be composed of 100 units (i.e. 1,200 units -
1,100 units). The amount of cost of goods sold is $22,000 (i.e., $20 x
1,100 units). The balance in ending inventory would be $2,000 (i.e.,
$20 x 100 units).
2
Administrative expenses are composed of $2,100 administrative
salaries + $2,900 administrative rent = $5,000.
3
Cash balance: $50,000 – $10,500 – $8,600 – $4,900 – $2,100 – $2,900
+ $29,700 = $50,700.
1-0
Problem 1-23B
a. Upstream costs = $520,000 product design + $1,800,000 research

and development = $2,320,000
b. Downstream costs = $400,000 advertising + $250,000
administrative costs = $650,000
c. Midstream costs = ($450 direct materials + $180 direct labor + $300
manufacturing overhead) x 5,000 units = $4,650,000
d. Sales price = GAAP defined product cost x 160%
Sales Price = ($450 direct materials + $180 direct labor + $300
manufacturing overhead) x 1.6 = $1,488
e. Sales revenue ($1,488 price x 5,000 units) $7,440,000

Cost of goods sold ($930 cost x 5,000 units) (4,650,000)
Gross margin 2,790,000
General, selling, and administrative costs
Upstream costs (R&D, and Design) (2,320,000)
Downstream costs (Administrative and (650,000)
Advertising)
Net loss $ (180,000)
f. It appears that management failed to give appropriate consideration
to upstream and downstream costs when pricing the product. Only
the GAAP based product cost was used to determine the price. The
total cost of making a battery is upstream cost + midstream cost +
downstream cost.
Total per unit costs:

Midstream cost = ($450 direct materials + $180 direct labor + $300
manufacturing overhead) = $930
Upstream cost = ($2,320,000 R&D and Design) / 5,000 units = $464
Downstream cost = ($650,000 Administrative and Advertising) /
5,000 units = $130
Total cost per unit = $930 Midstream + $464 Upstream + $130

Downstream = $1,524.
Note that the selling price of $1,488 is below the total cost per unit of
$1,524. This explains the loss incurred by the company.
1-1
Problem 1-24B
a.
Financial Statements
Packer Company
Income Statement Balance Sheet
Operating expenses (90,000) Cash2
1
$128,000
Net Income $ 8,000 Total assets $128,000
Equity
1
The entire $90,000 expenditure is an administrative cost that is
recognized as an expense.
2
The cash balance will be the same for all three scenarios. The
company acquires $120,000 of capital, earns sales revenue of
$98,000 and spends $90,000 thereby leaving a $128,000 ending
balance. Do not be confused by the fact that the $90,000 is used to
pay for different things under the alternative scenarios. The cash
outflow is always $90,000 regardless of what is bought.
1-2
b.
Packer Company
1
Depreciation exp. (18,000) Cash $128,000
Net income $80,000 Trucks 90,000
Accumulated dep.1 (18,000)
Total assets $200,000
Equity
1
The $90,000 was used to purchase trucks that had a zero salvage
value and 5-year useful lives. The depreciation charge is $18,000
[i.e., ($90,000 - 0) ÷ 5 years]. Since the solution applies to the first
year of operation the amount in the accumulated depreciation
account and the amount in depreciation expense are equal.
1-3

c.
Packer Company
1
Cost of goods Sold (40,000) Cash $128,000
1
Gross margin 58,000 Finished goods inv. 10,000
Administrative expense2 (2,000) Mfg. equipment 48,000
1
Net income $56,000 Accumulated dep. (10,000)
Total assets $176,000
Equity
1
The product costs are $18,000 for materials, $22,000 for labor, and $10,000
for overhead. The overhead cost results from depreciation on the
manufacturing equipment [i.e., ($48,000 cost - $8,000 salvage) ÷ 4-year
life]. Accordingly, $50,000 (i.e., $18,000 + $22,000 + $10,000) was used to
make the 2,500 units of product. The cost per unit is $20 (i.e., $50,000 ÷
2,500 units). Since 2,000 units were sold, ending inventory will be
composed of 500 units (i.e., 2,500 units - 2,000 units). The amount of cost
of goods sold is $40,000 (i.e., $20 x 2,000 units). The balance in ending
inventory would be $10,000 (i.e., $20 x 500 units).
2
Salaries of sales and administrative employees.
d. It is highly unlikely that Packer can determine the exact cost of

any particular unit of product. Materials and labor usage will differ
slightly between product units. Cost averaging smooths these
differences across units of product.
1-4
Problem 1-25B
a. Annual inventory holding cost:
($750,000 x 12%) + $80,000 = $170,000
b. Hanna uses a JIT system. Hanna acquires automobiles only
when it has received customer orders. Therefore, Hanna does
not hold inventory. Without the associated inventory holding
cost, Hanna can afford to offer reduced prices to its customers.
1-5
Problem 1-26B
a. 240 hamburgers are sold:

Revenue (240 x $4.50) $1,080
Cost of hamburgers (300 x $1.50) (450)
Gross margin 630
Selling, general, & administrative expenses (130)
Net income $500
Cost of wasted hamburgers: [(300 – 240) x $1.50] = $90.
b. 360 customers attempt to buy hamburgers but 60 of them must

be turned away:
Revenue (300 x $4.50) $1,350
Gross margin 900
Net income $ 770
Had Mark’s prepared 360 hamburgers in advance, it could have

made more profit:
Revenue (360 x $4.50) $1,620
Gross margin 1,080
Net income $ 950
The lost profit resulting from insufficient supply is $90 per day
($950  $770 = $180, or $3 x 60 = $180).
1-6
c. 240 hamburgers are sold under the JIT system:
Revenue (240 x $4.50) $1,080

Gross margin 720
Net income $ 560
Under the JIT system, the cost of excessive hamburgers can be

eliminated. The reduction of hamburger cost exceeds the
increase of employee payroll cost. As a result, the net income
increases by $60, as compared to the net income under the
original inventory system.
d. 360 hamburgers are sold under the JIT system:
Revenue (360 x $4.50) $1,620

Cost of hamburgers (360 x 1.50) (540)
Gross margin 1,080
Net income $ 920
Under the JIT system, additional customer orders can be

accepted. The additional revenue exceeds the additional
employee payroll cost. Therefore, the net income increases by
$150, as compared to that under the original inventory system.
e. The hamburgers prepared under the JIT system are fresher

than those prepared hours in advance. Mark’s can also
prepare hamburgers according to individual customer
preferences. Consequently, customer satisfaction will
increase. Better customer satisfaction will lead to more
customer purchases and higher revenues. As the cost per
hamburger remains stable, the higher sales revenue will result
in a higher profit. In addition, Mark’s can avoid turning excess
customers away, which could have a negative impact on its
reputation.
1-7
Problem 1-27B
a. Option No. 1
Briggs Company
1
Cost of goods sold (96,000) Cash2 $170,000
Gross margin 64,000 Finished goods inv. 3 24,000
Gen., sell., & adm. exp. (20,000) Total assets $194,000
Net income $ 44,000
Equity
1
$120,000 (Total product cost)  10,000 = $12 per unit. $12 * 8,000 =
$96,000.
2
Cash balance: $150,000 - $120,000 - $20,000 + $160,000 = $170,000
3
$12 X 2,000 = $24,000.
a. Option 2
1
Cost of goods sold (112,000) Cash $170,000
2
Gross margin 48,000 Finished goods inv. 28,000
Gen., sell., & adm. exp. 0 Total assets $198,000
Net income $ 48,000
Equity
1
Total product cost: $120,000 + $20,000 = $140,000. Product cost per
unit: $140,000  10,000 = $14.00
Cost of goods sold: $14.00 x 8,000 = $112,000.
2
Inventory: $14.00 X 2,000 = $28,000.
1-8
b. Option No. 2 results in financial statements that are more likely

to leave a favorable impression on investors and creditors
because the net income under option No. 2 is $4,000 greater
than that under option No. 1.
c. President’s bonus under option No. 1:

$44,000 x 10% = $4,400
President’s bonus under option No. 2:

$48,000 x 10% = $4,800
Option No. 2 provides the president with a higher bonus.
d. Income tax expense under option No. 1:

$44,000 x 35% = $15,400
Income tax expense under option No. 2:

$48,000 x 35% = $16,800
Option No. 1 minimizes the amount of the company’s income

tax expense.
e. Option No. 2 provides the president with a higher bonus.

However, option No. 1 minimizes the amount of the company’s
income tax expense. As a result, these two options reveal a
conflict of interest between the company and its president. To
avoid the conflict of interest, the company can offer a bonus
plan that is tied to the company’s stock price instead of net
income on financial statements. To the extent that the market
is efficient, it will reward performance that adds value to a
company by bidding up the company’s stock price. An
efficient market is not deceived by accounting policies that are
designed solely to manipulate financial statements.
1-9
Problem 1-28B
a. Separation of duties failed to prevent the company’s fraudulent
reporting because collusion in the management team
circumvented the control of separating duties.
b. The entire executive team was under pressure to report inflated
earnings because their bonuses depended on it. They
rationalized that the fraud could keep the company’s stock price
high and, thus, was good for both company management and
stockholders. Furthermore, they convinced themselves that the
company would perform better in the future and the earnings
growth would allow them to correct fraudulent revenues they
were currently reporting. The opportunity was available
because company management had the power to override any
internal control design.
c. The Sarbanes-Oxley act charges the chief executive officer and
the chief financial officer with the ultimate responsibility for the
accuracy of the company’s financial statements and the
accompanying notes. An intentional misrepresentation is
punishable by a fine of up to $5 million and imprisonment of up
to 20 years. The penalty clause would have served as a strong
deterrence against this type of fraudulent reporting.
d. The CFO violated the Statement of Ethical Professional Practice
on two major items: integrity and objectivity. Regarding
integrity, the officer’s interests conflicted with the company’s
because the CFO, with other officers, reaped the bonus that he
or she didn’t deserve. Moreover, their actions certainly
discredited the accounting profession. Regarding objectivity,
the CFO knowingly allowed unfair information to be
communicated.
1-10
Fundamental Managerial Accounting Concepts 9th Edition Edmonds Solutions Manual
Problem 1-29B
a. The value-added activities include the doctor’s weighing Ms.

Watson, advising her to lose weight, taking her temperature,
taking a throat culture and blood test, prescribing medicine,
and advising Ms. Watson to get bed rest. The nonvalue-added
activities include Ms. Watson’s completing the same forms
repeatedly, waiting for a long time again and again, answering
the accounting clerk's unnecessary questions, and handling
the billing error.
b. Ms. Watson’s personal information should have already been

in her patient file when she walked in Dr. Holt’s office. To
eliminate the unnecessary repetition of completing personal
information forms, the receptionist should ask the patient
whether his or her personal information has changed since the
last visit. If the answer is no, no additional forms should be
given to the patient.
The office administrator should maintain a realistic schedule

of patient appointments. Tight process control of a realistic
schedule can reduce the time that patients must wait.
The patient file should accompany the patient to the

accounting office. By consulting the personal information in
the file, the accounting clerk would not have to ask the same
personal questions that the patient has been asked repeatedly.
If the doctor hires qualified employees, trains them well, and

establishes proper accounting controls, billing errors can be
reduced or eliminated.
1-11
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Fundamental Managerial Accounting

Concepts 9th Edition Edmonds

Managerial 9e – Chapter 1 – Exercises and Problems – Set B

Managerial Accounting Financial Accounting

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Selling, General, and

Assets = Liab. + Equity Rev. – Exp. = Net Inc.

Assets = Equity Income Statement

b. Depreciation costs that would be classified as product costs are the

Assets = Equity Income Statement

b. Cost of inventory per unit = $18,000 ÷ 6,000 = $3

Ending inventory in units = 6,000 – 4,800 = 1,200

Cost of ending inventory = $3 x 1,200 = $3,600

c. Cost of goods sold = $3 x 4,800 = $14,400

Item Upstream Midstream Downstream

a. The $35,000,000 of research and development costs is an upstream

b. Cost of goods sold: $20 x 600,000 = $12,000,000

e. GAAP requires expensing research and development costs in the

a. The three components of product cost incurred in producing cakes are

b. Measuring product cost for a merchandising company, such as a retail

a. Event No. 1 represents the expiration of insurance on a factory building

b. The cost of insuring a factory is among the costs necessary to produce

The opportunity cost of lost sales: ($30 – $20) x 100 = $1,000

c. If Denise could arrange to order only the number of yearbooks

Number of units in ending inventory:

Inventory Completed 5,000

The process of shampooing a customer's hair before cutting is nonvalue-

Information Item Financial Managerial

Event Assets = Equity Income Statement

*Record accumulated depreciation as negative amounts under these columns.

Problem 1-20B (continued)

Direct materials $39,000

* Depreciation of manufacturing equipment:

b. Cost of goods sold: $6.25 x 10,000 = $62,500

c. Ending inventory: $6.25 x (12,000  10,000) = $12,500

f. $76,000* + $12,500 + $21,000 + $49,000= $158,500

*$98,000 – $28,000 – $58,000 – $20,000 – $27,000 – $39,000 + ($15 x 10,000)

Event Assets = Equity Income Statement

*Record accumulated depreciation as negative amounts under these columns.

a. Upstream costs = $520,000 product design + $1,800,000 research

e. Sales revenue ($1,488 price x 5,000 units) $7,440,000

Total per unit costs:

Total cost per unit = $930 Midstream + $464 Upstream + $130

Problem 1-24B (continued)

Problem 1-24B (continued)

d. It is highly unlikely that Packer can determine the exact cost of

a. 240 hamburgers are sold:

Cost of wasted hamburgers: [(300 – 240) x $1.50] = $90.

b. 360 customers attempt to buy hamburgers but 60 of them must

Had Mark’s prepared 360 hamburgers in advance, it could have

Problem 1-26B (continued)

c. 240 hamburgers are sold under the JIT system:

Revenue (240 x $4.50) $1,080

Under the JIT system, the cost of excessive hamburgers can be

d. 360 hamburgers are sold under the JIT system:

Revenue (360 x $4.50) $1,620

Under the JIT system, additional customer orders can be

e. The hamburgers prepared under the JIT system are fresher

b. Option No. 2 results in financial statements that are more likely

c. President’s bonus under option No. 1:

President’s bonus under option No. 2:

Option No. 2 provides the president with a higher bonus.

d. Income tax expense under option No. 1:

Income tax expense under option No. 2: