MANAGERIAL ACCOUNTING
150 Multiple-Choice Exam Questions with Answers
and Rationales
Garrison, Noreen & Brewer, Managerial Accounting, 18th Edition
Page 1
,Chapter 1: Managerial Accounting and the Business
Environment
1. Which of the following is a key difference between
managerial accounting and financial accounting?
A. Managerial accounting must follow GAAP, while financial
accounting does not.
B. Managerial accounting statements are audited each year by
independent CPAs.
C. Managerial accounting focuses on internal decision makers
and emphasizes the future, while financial accounting serves
external users and reports on the past.
D. Managerial accounting reports are required by the SEC for
all public companies.
Answer: C
Rationale: Managerial accounting serves managers inside the
organization, is not bound by GAAP, and stresses relevance,
timeliness, and future-oriented information. Financial accounting
serves outsiders such as investors and creditors and must follow
GAAP.
2. Which management function involves selecting a course
of action and specifying how it will be implemented?
A. Planning
B. Controlling
C. Directing and motivating
D. Recording transactions
Answer: A
Rationale: Planning means developing goals and the detailed
steps to reach them (a budget is a common result). Directing and
motivating carries out plans day to day, and controlling compares
results with the plan.
Page 2
,3. A manager compares actual sales and expenses with the
budget and investigates the significant differences. Which
management function does this best illustrate?
A. Planning
B. Directing and motivating
C. Strategic positioning
D. Controlling
Answer: D
Rationale: Controlling is the feedback loop: comparing actual
results with the plan and taking corrective action where needed.
4. Which of the following positions in a manufacturing
company is most clearly a staff position?
A. Production line supervisor
B. Corporate controller
C. Plant manager
D. Assembly department manager
Answer: B
Rationale: Line positions are directly involved in the basic
objectives of the organization (producing and selling). Staff
positions such as accounting, human resources, and legal provide
advice and support to line managers.
Page 3
, 5. The value chain consists of:
A. the sequence of journal entries needed to close the books
each period.
B. the major business functions that add value to a company's
products and services, such as research and development,
design, production, marketing, distribution, and customer
service.
C. the set of suppliers whose financial statements a company
must consolidate.
D. the four perspectives of the balanced scorecard.
Answer: B
Rationale: The value chain is the set of business functions that
add value to a product or service, from research and development
through customer service. Managerial accounting information
supports every link in the chain.
6. Which statement best describes a just-in-time (JIT)
system?
A. Large inventories of raw materials are kept on hand to
prevent shortages.
B. Production is scheduled in large batches to spread setup
costs over many units.
C. Products are made ahead of demand based on sales
forecasts.
D. Goods are produced only as needed to meet customer
demand, which keeps inventories low.
Answer: D
Rationale: JIT is a pull system: a unit is produced only when a
customer order or a downstream process calls for it. It reduces
inventories, cycle time, and waste.
Page 4
150 Multiple-Choice Exam Questions with Answers
and Rationales
Garrison, Noreen & Brewer, Managerial Accounting, 18th Edition
Page 1
,Chapter 1: Managerial Accounting and the Business
Environment
1. Which of the following is a key difference between
managerial accounting and financial accounting?
A. Managerial accounting must follow GAAP, while financial
accounting does not.
B. Managerial accounting statements are audited each year by
independent CPAs.
C. Managerial accounting focuses on internal decision makers
and emphasizes the future, while financial accounting serves
external users and reports on the past.
D. Managerial accounting reports are required by the SEC for
all public companies.
Answer: C
Rationale: Managerial accounting serves managers inside the
organization, is not bound by GAAP, and stresses relevance,
timeliness, and future-oriented information. Financial accounting
serves outsiders such as investors and creditors and must follow
GAAP.
2. Which management function involves selecting a course
of action and specifying how it will be implemented?
A. Planning
B. Controlling
C. Directing and motivating
D. Recording transactions
Answer: A
Rationale: Planning means developing goals and the detailed
steps to reach them (a budget is a common result). Directing and
motivating carries out plans day to day, and controlling compares
results with the plan.
Page 2
,3. A manager compares actual sales and expenses with the
budget and investigates the significant differences. Which
management function does this best illustrate?
A. Planning
B. Directing and motivating
C. Strategic positioning
D. Controlling
Answer: D
Rationale: Controlling is the feedback loop: comparing actual
results with the plan and taking corrective action where needed.
4. Which of the following positions in a manufacturing
company is most clearly a staff position?
A. Production line supervisor
B. Corporate controller
C. Plant manager
D. Assembly department manager
Answer: B
Rationale: Line positions are directly involved in the basic
objectives of the organization (producing and selling). Staff
positions such as accounting, human resources, and legal provide
advice and support to line managers.
Page 3
, 5. The value chain consists of:
A. the sequence of journal entries needed to close the books
each period.
B. the major business functions that add value to a company's
products and services, such as research and development,
design, production, marketing, distribution, and customer
service.
C. the set of suppliers whose financial statements a company
must consolidate.
D. the four perspectives of the balanced scorecard.
Answer: B
Rationale: The value chain is the set of business functions that
add value to a product or service, from research and development
through customer service. Managerial accounting information
supports every link in the chain.
6. Which statement best describes a just-in-time (JIT)
system?
A. Large inventories of raw materials are kept on hand to
prevent shortages.
B. Production is scheduled in large batches to spread setup
costs over many units.
C. Products are made ahead of demand based on sales
forecasts.
D. Goods are produced only as needed to meet customer
demand, which keeps inventories low.
Answer: D
Rationale: JIT is a pull system: a unit is produced only when a
customer order or a downstream process calls for it. It reduces
inventories, cycle time, and waste.
Page 4
