Chapter‟1‟ Managerial‟Accounting‟and‟the‟Business‟Environment
True/False‟Questions
1. Although‘financial‘and‘managerial‘accounting‘differ‘in‘many‘ways,‘they‘are‘similar‘in‘t
hat‘both‘rely‘on‘the‘same‘underlying‘financial‘data.
Answer:‘True‘ ‘ Level:‘Medium‘ ‘ LO:‘1
2. Managerial‘accounting‘is‘a‘branch‘of‘financial‘accounting‘and‘serves‘essentially‘the‘s
ame‘purposes‘as‘financial‘accounting.
Answer:‘False‘ ‘ Level:‘Medium‘ ‘ LO:‘1
3. Managerial‘accounting‘places‘greater‘emphasis‘on‘the‘future‘than‘financial‘a
ccounting,‘which‘is‘primarily‘concerned‘with‘the‘past.
Answer:‘True‘ ‘ Level:‘Easy‘ ‘ LO:‘1
4. Managerial‘accounting‘is‘not‘needed‘in‘a‘non-profit‘or‘governmental‘organization.
Answer:‘False‘ ‘ Level:‘Easy‘ ‘ LO:‘1
5. When‘carrying‘out‘their‘planning‘activities,‘managers‘select‘a‘course‘of‘action‘and‘s
pecify‘how‘the‘action‘will‘be‘implemented.
Answer:‘True‘ ‘ Level:‘Easy‘ ‘ LO:‘2
6. When‘carrying‘out‘their‘planning‘activities,‘managers‘obtain‘feedback‘to‘ensure‘that‘th
e‘plan‘is‘actually‘carried‘out‘and‘is‘appropriately‘modified‘as‘circumstances‘change.
Answer:‘False‘ ‘ Level:‘Medium‘ ‘ LO:‘2
7. The‘controller‘occupies‘a‘line‘position‘in‘an‘organization.
Answer:‘False‘ ‘ Level:‘Easy‘ ‘ LO:‘2
8. Decentralization‘means‘the‘delegation‘of‘decision-
making‘authority‘throughout‘an‘organization‘by‘allowing‘managers‘at‘various‘operati
ng‘levels‘to‘make‘key‘decisions‘relating‘to‘their‘own‘area‘of‘responsibility.
Answer:‘True‘ ‘ Level:‘Easy‘ ‘ LO:‘2
Garrison,’Managerial’Accounting,’12th’Edition 3
,Chapter‟1‟ Managerial‟Accounting‟and‟the‟Business‟Environment
9. A‘firm's‘organization‘chart‘will‘normally‘show‘both‘the‘formal‘and‘informal‘lines‘of‘r
eporting‘and‘communication.
Answer:‘False‘ ‘ Level:‘Easy‘ ‘ LO:‘2
10. The‘Chief‘Financial‘Officer‘of‘an‘organization‘is‘responsible‘for‘ensuring‘that‘line‘o
perations‘run‘smoothly.
Answer:‘False‘ ‘ Level:‘Medium‘ ‘ LO:‘2
11. Traditionally,‘companies‘have‘maintained‘large‘amounts‘of‘raw‘materials,‘work‘in‘proc
ess,‘and‘finished‘goods‘inventories‘to‘act‘as‘buffers‘so‘that‘operations‘can‘proceed‘smoot
hly‘even‘if‘there‘are‘unanticipated‘disruptions.
Answer:‘True‘ ‘ Level:‘Medium‘ ‘ LO:‘3
12. Process‘Reengineering‘is‘generally‘considered‘to‘be‘a‘more‘radical‘approach‘to‘i
mprovement‘than‘Total‘Quality‘Management.
Answer:‘True‘ ‘ Level:‘Easy‘ ‘ LO:‘3
13. Process‘Reengineering‘emphasizes‘a‘team‘approach‘involving‘front-
line‘workers,‘whereas‘Total‘Quality‘Management‘is‘usually‘implemented‘using‘outsid
e‘specialists‘and‘is‘imposed‘from‘above.
Answer:‘False‘ ‘ Level:‘Medium‘ ‘ LO:‘3
14. If‘ethical‘standards‘were‘not‘generally‘followed,‘one‘of‘the‘results‘would‘probably‘be‘f
ewer‘goods‘and‘services‘available‘in‘the‘marketplace.
Answer:‘True‘ ‘ Level:‘Medium‘ ‘ LO:‘4
15. The‘Standards‘of‘Ethical‘Conduct‘for‘Management‘Accountants‘promulgated‘by‘the‘In
stitute‘of‘Management‘Accountants‘specifically‘state‘that‘management‘accountants'‗sol
e‘ethical‘responsibility‘is‘to‘not‘break‘any‘laws.
Answer:‘False‘ ‘ Level:‘Easy‘ ‘ LO:‘4
4 Garrison,’Managerial’Accounting,’12th’Edition
,Chapter‟1‟ Managerial‟Accounting‟and‟the‟Business‟Environment
Multiple‟Choice‟Questions
16. Management‘accounting‘focuses‘primarily‘on‘providing‘data‘for:
A) internal‘uses‘by‘managers.
B) external‘uses‘by‘stockholders‘and‘creditors.
C) external‘uses‘by‘the‘Internal‘Revenue‘Service.
D) external‘uses‘by‘the‘Securities‘and‘Exchange‘Commission.
Answer:‘A‘ ‘ Level:‘Easy‘ ‘ LO:‘1
17. Managerial‘accounting:
A) is‘more‘future‘oriented‘than‘financial‘accounting.
B) tends‘to‘summarize‘information‘more‘than‘financial‘accounting
C) is‘primarily‘concerned‘with‘providing‘information‘to‘external‘users.
D) is‘more‘concerned‘with‘precision‘than‘timeliness.
Answer:‘A‘ ‘ Level:‘Easy‘ ‘ LO:‘1
18. Compared‘to‘financial‘accounting,‘managerial‘accounting‘places‘more‘emphasis‘on:
A) the‘flexibility‘of‘information.
B) the‘precision‘of‘information.
C) the‘timeliness‘of‘information.
D) both‘A‘and‘C‘above.
Answer:‘D‘ ‘ Level:‘Easy‘ ‘ LO:‘1
19. The‘function‘of‘management‘that‘compares‘planned‘results‘to‘actual‘results‘is‘known‘a
s:
A) planning.
B) directing‘and‘motivating.
C) controlling.
D) decision‘making.
Answer:‘C‘ ‘ Level:‘Easy‘ ‘ LO:‘2
20. Which‘of‘the‘functions‘of‘management‘involves‘overseeing‘day-to-day‘activities?
A) Planning
B) Directing‘and‘motivating
C) Controlling
D) Decision‘making
Answer:‘B‘ ‘ Level:‘Easy‘ ‘ LO:‘2
Garrison,’Managerial’Accounting,’12th’Edition 5
, Chapter‟1‟ Managerial‟Accounting‟and‟the‟Business‟Environment
21. Which‘of‘the‘following‘is‘not‘one‘of‘the‘three‘basic‘activities‘of‘a‘manager?
A) Planning
B) Controlling
C) Directing‘and‘motivating
D) Compiling‘management‘accounting‘reports‘
Answer:‘D‘ Level:‘Easy‘ LO:‘2
22. The‘delegation‘of‘decision‘making‘to‘lower‘levels‘in‘an‘organization‘is‘known‘as:
A) the‘planning‘and‘control‘cycle.
B) controlling.
C) decentralization.
D) none‘of‘these.
Answer:‘C‘ ‘ Level:‘Easy‘ ‘ LO:‘2
23. Which‘of‘the‘following‘statements‘are‘false‘concerning‘line‘and‘staff‘functions?
I. Persons‘occupying‘staff‘functions‘have‘authority‘over‘persons‘occupying‘line‘f
unctions.
II. Both‘line‘and‘staff‘functions‘are‘depicted‘on‘the‘organization‘chart.
III. Line‘functions‘are‘directly‘related‘to‘the‘basic‘objectives‘of‘an‘organization.
A) Only‘I
B) Only‘II
C) Only‘I‘and‘II
D) I,‘II,‘and‘III
Answer:‘A‘ ‘ Level:‘Medium‘ ‘ LO:‘2
24. Which‘of‘following‘would‘normally‘be‘found‘on‘a‘manufacturing‘company's‘o
rganization‘chart?
A) the‘layout‘of‘the‘factory‘assembly‘lines
B) a‘list‘of‘the‘materials‘needed‘to‘produce‘each‘of‘the‘company's‘products
C) the‘informal‘lines‘of‘reporting‘and‘communication
D) none‘of‘the‘above
Answer:‘D‘ ‘ Level:‘Easy‘ ‘ LO:‘2
6 Garrison,’Managerial’Accounting,’12th’Edition
True/False‟Questions
1. Although‘financial‘and‘managerial‘accounting‘differ‘in‘many‘ways,‘they‘are‘similar‘in‘t
hat‘both‘rely‘on‘the‘same‘underlying‘financial‘data.
Answer:‘True‘ ‘ Level:‘Medium‘ ‘ LO:‘1
2. Managerial‘accounting‘is‘a‘branch‘of‘financial‘accounting‘and‘serves‘essentially‘the‘s
ame‘purposes‘as‘financial‘accounting.
Answer:‘False‘ ‘ Level:‘Medium‘ ‘ LO:‘1
3. Managerial‘accounting‘places‘greater‘emphasis‘on‘the‘future‘than‘financial‘a
ccounting,‘which‘is‘primarily‘concerned‘with‘the‘past.
Answer:‘True‘ ‘ Level:‘Easy‘ ‘ LO:‘1
4. Managerial‘accounting‘is‘not‘needed‘in‘a‘non-profit‘or‘governmental‘organization.
Answer:‘False‘ ‘ Level:‘Easy‘ ‘ LO:‘1
5. When‘carrying‘out‘their‘planning‘activities,‘managers‘select‘a‘course‘of‘action‘and‘s
pecify‘how‘the‘action‘will‘be‘implemented.
Answer:‘True‘ ‘ Level:‘Easy‘ ‘ LO:‘2
6. When‘carrying‘out‘their‘planning‘activities,‘managers‘obtain‘feedback‘to‘ensure‘that‘th
e‘plan‘is‘actually‘carried‘out‘and‘is‘appropriately‘modified‘as‘circumstances‘change.
Answer:‘False‘ ‘ Level:‘Medium‘ ‘ LO:‘2
7. The‘controller‘occupies‘a‘line‘position‘in‘an‘organization.
Answer:‘False‘ ‘ Level:‘Easy‘ ‘ LO:‘2
8. Decentralization‘means‘the‘delegation‘of‘decision-
making‘authority‘throughout‘an‘organization‘by‘allowing‘managers‘at‘various‘operati
ng‘levels‘to‘make‘key‘decisions‘relating‘to‘their‘own‘area‘of‘responsibility.
Answer:‘True‘ ‘ Level:‘Easy‘ ‘ LO:‘2
Garrison,’Managerial’Accounting,’12th’Edition 3
,Chapter‟1‟ Managerial‟Accounting‟and‟the‟Business‟Environment
9. A‘firm's‘organization‘chart‘will‘normally‘show‘both‘the‘formal‘and‘informal‘lines‘of‘r
eporting‘and‘communication.
Answer:‘False‘ ‘ Level:‘Easy‘ ‘ LO:‘2
10. The‘Chief‘Financial‘Officer‘of‘an‘organization‘is‘responsible‘for‘ensuring‘that‘line‘o
perations‘run‘smoothly.
Answer:‘False‘ ‘ Level:‘Medium‘ ‘ LO:‘2
11. Traditionally,‘companies‘have‘maintained‘large‘amounts‘of‘raw‘materials,‘work‘in‘proc
ess,‘and‘finished‘goods‘inventories‘to‘act‘as‘buffers‘so‘that‘operations‘can‘proceed‘smoot
hly‘even‘if‘there‘are‘unanticipated‘disruptions.
Answer:‘True‘ ‘ Level:‘Medium‘ ‘ LO:‘3
12. Process‘Reengineering‘is‘generally‘considered‘to‘be‘a‘more‘radical‘approach‘to‘i
mprovement‘than‘Total‘Quality‘Management.
Answer:‘True‘ ‘ Level:‘Easy‘ ‘ LO:‘3
13. Process‘Reengineering‘emphasizes‘a‘team‘approach‘involving‘front-
line‘workers,‘whereas‘Total‘Quality‘Management‘is‘usually‘implemented‘using‘outsid
e‘specialists‘and‘is‘imposed‘from‘above.
Answer:‘False‘ ‘ Level:‘Medium‘ ‘ LO:‘3
14. If‘ethical‘standards‘were‘not‘generally‘followed,‘one‘of‘the‘results‘would‘probably‘be‘f
ewer‘goods‘and‘services‘available‘in‘the‘marketplace.
Answer:‘True‘ ‘ Level:‘Medium‘ ‘ LO:‘4
15. The‘Standards‘of‘Ethical‘Conduct‘for‘Management‘Accountants‘promulgated‘by‘the‘In
stitute‘of‘Management‘Accountants‘specifically‘state‘that‘management‘accountants'‗sol
e‘ethical‘responsibility‘is‘to‘not‘break‘any‘laws.
Answer:‘False‘ ‘ Level:‘Easy‘ ‘ LO:‘4
4 Garrison,’Managerial’Accounting,’12th’Edition
,Chapter‟1‟ Managerial‟Accounting‟and‟the‟Business‟Environment
Multiple‟Choice‟Questions
16. Management‘accounting‘focuses‘primarily‘on‘providing‘data‘for:
A) internal‘uses‘by‘managers.
B) external‘uses‘by‘stockholders‘and‘creditors.
C) external‘uses‘by‘the‘Internal‘Revenue‘Service.
D) external‘uses‘by‘the‘Securities‘and‘Exchange‘Commission.
Answer:‘A‘ ‘ Level:‘Easy‘ ‘ LO:‘1
17. Managerial‘accounting:
A) is‘more‘future‘oriented‘than‘financial‘accounting.
B) tends‘to‘summarize‘information‘more‘than‘financial‘accounting
C) is‘primarily‘concerned‘with‘providing‘information‘to‘external‘users.
D) is‘more‘concerned‘with‘precision‘than‘timeliness.
Answer:‘A‘ ‘ Level:‘Easy‘ ‘ LO:‘1
18. Compared‘to‘financial‘accounting,‘managerial‘accounting‘places‘more‘emphasis‘on:
A) the‘flexibility‘of‘information.
B) the‘precision‘of‘information.
C) the‘timeliness‘of‘information.
D) both‘A‘and‘C‘above.
Answer:‘D‘ ‘ Level:‘Easy‘ ‘ LO:‘1
19. The‘function‘of‘management‘that‘compares‘planned‘results‘to‘actual‘results‘is‘known‘a
s:
A) planning.
B) directing‘and‘motivating.
C) controlling.
D) decision‘making.
Answer:‘C‘ ‘ Level:‘Easy‘ ‘ LO:‘2
20. Which‘of‘the‘functions‘of‘management‘involves‘overseeing‘day-to-day‘activities?
A) Planning
B) Directing‘and‘motivating
C) Controlling
D) Decision‘making
Answer:‘B‘ ‘ Level:‘Easy‘ ‘ LO:‘2
Garrison,’Managerial’Accounting,’12th’Edition 5
, Chapter‟1‟ Managerial‟Accounting‟and‟the‟Business‟Environment
21. Which‘of‘the‘following‘is‘not‘one‘of‘the‘three‘basic‘activities‘of‘a‘manager?
A) Planning
B) Controlling
C) Directing‘and‘motivating
D) Compiling‘management‘accounting‘reports‘
Answer:‘D‘ Level:‘Easy‘ LO:‘2
22. The‘delegation‘of‘decision‘making‘to‘lower‘levels‘in‘an‘organization‘is‘known‘as:
A) the‘planning‘and‘control‘cycle.
B) controlling.
C) decentralization.
D) none‘of‘these.
Answer:‘C‘ ‘ Level:‘Easy‘ ‘ LO:‘2
23. Which‘of‘the‘following‘statements‘are‘false‘concerning‘line‘and‘staff‘functions?
I. Persons‘occupying‘staff‘functions‘have‘authority‘over‘persons‘occupying‘line‘f
unctions.
II. Both‘line‘and‘staff‘functions‘are‘depicted‘on‘the‘organization‘chart.
III. Line‘functions‘are‘directly‘related‘to‘the‘basic‘objectives‘of‘an‘organization.
A) Only‘I
B) Only‘II
C) Only‘I‘and‘II
D) I,‘II,‘and‘III
Answer:‘A‘ ‘ Level:‘Medium‘ ‘ LO:‘2
24. Which‘of‘following‘would‘normally‘be‘found‘on‘a‘manufacturing‘company's‘o
rganization‘chart?
A) the‘layout‘of‘the‘factory‘assembly‘lines
B) a‘list‘of‘the‘materials‘needed‘to‘produce‘each‘of‘the‘company's‘products
C) the‘informal‘lines‘of‘reporting‘and‘communication
D) none‘of‘the‘above
Answer:‘D‘ ‘ Level:‘Easy‘ ‘ LO:‘2
6 Garrison,’Managerial’Accounting,’12th’Edition
