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 that 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 same purposes as financial accounting.
Answer: False Level: Medium LO: 1
3. Managerial accounting places greater emphasis on the
future than financial accounting, 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 specify 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 the 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
operating 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 reporting and communication.
Answer: False Level: Easy LO: 2
10. The Chief Financial Officer of an organization is responsible for
ensuring that line operations run smoothly.
Answer: False Level: Medium LO: 2
11. Traditionally, companies have maintained large amounts of raw
materials, work in process, and finished goods inventories to act as
buffers so that operations can proceed smoothly 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 improvement 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 outside 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 fewer 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 Institute of Management Accountants specifically
state that management accountants' sole ethical responsibility is to not
break any laws.
Answer: False Level: Easy LO: 4
, 4 Garrison, Managerial Accounting, 12th
Edition
Environment
True/False Questions
1. Although financial and managerial accounting differ in many ways, they
are similar in that 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 same purposes as financial accounting.
Answer: False Level: Medium LO: 1
3. Managerial accounting places greater emphasis on the
future than financial accounting, 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 specify 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 the 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
operating 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 reporting and communication.
Answer: False Level: Easy LO: 2
10. The Chief Financial Officer of an organization is responsible for
ensuring that line operations run smoothly.
Answer: False Level: Medium LO: 2
11. Traditionally, companies have maintained large amounts of raw
materials, work in process, and finished goods inventories to act as
buffers so that operations can proceed smoothly 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 improvement 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 outside 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 fewer 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 Institute of Management Accountants specifically
state that management accountants' sole ethical responsibility is to not
break any laws.
Answer: False Level: Easy LO: 4
, 4 Garrison, Managerial Accounting, 12th
Edition
