Managerial Accounting and the Business Environment Test Bank
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
,Multiple dChoice dQuestions
16. Management daccounting dfocuses dprimarily don dproviding ddata dfor:
A) internal duses dby dmanagers.
B) external duses dby dstockholders dand dcreditors.
C) external duses dby dthe dInternal dRevenue dService.
D) external duses dby dthe dSecurities dand dExchange dCommission.
Answer: dA d d Level: dEasy d d LO: d1
17. Managerial daccounting:
A) is dmore dfuture doriented dthan dfinancial daccounting.
B) tends dto dsummarize dinformation dmore dthan dfinancial daccounting
C) is dprimarily dconcerned dwith dproviding dinformation dto dexternal dusers.
D) is dmore dconcerned dwith dprecision dthan dtimeliness.
Answer: dA d d Level: dEasy d d LO: d1
18. Compared dto dfinancial daccounting, dmanagerial daccounting dplaces dmore demphasis don:
A) the dflexibility dof dinformation.
B) the dprecision dof dinformation.
C) the dtimeliness dof dinformation.
D) both dA dand dC dabove.
Answer: dD d d Level: dEasy d d LO: d1
19. The dfunction dof dmanagement dthat dcompares dplanned dresults dto dactual dresults dis
dknown das:
A) planning.
B) directing dand dmotivating.
C) controlling.
D) decision dmaking.
Answer: dC d d Level: dEasy d d LO: d2
20. Which dof dthe dfunctions dof dmanagement dinvolves doverseeing dday-to-day dactivities?
A) Planning
B) Directing dand dmotivating
C) Controlling
D) Decision dmaking
Answer: dB d d Level: dEasy d d LO: d2
Garrison, Managerial Accounting, 12th Edition 5
, Chapter 1 Managerial Accounting and the Business Environment
21. Which dof dthe dfollowing dis dnot done dof dthe dthree dbasic dactivities dof da dmanager?
A) Planning
B) Controlling
C) Directing dand dmotivating
D) Compiling dmanagement daccounting
dreports dAnswer: dD d Level: dEasy d LO: d2
22. The ddelegation dof ddecision dmaking dto dlower dlevels din dan dorganization dis dknown das:
A) the dplanning dand dcontrol dcycle.
B) controlling.
C) decentralization.
D) none dof dthese.
Answer: dC d d Level: dEasy d d LO: d2
23. Which dof dthe dfollowing dstatements dare dfalse dconcerning dline dand dstaff dfunctions?
I. Persons doccupying dstaff dfunctions dhave dauthority dover dpersons doccupying
dline dfunctions.
II. Both dline dand dstaff dfunctions dare ddepicted don dthe dorganization dchart.
III. Line dfunctions dare ddirectly drelated dto dthe dbasic dobjectives dof dan dorganization.
A) Only dI
B) Only dII
C) Only dI dand dII
D) I, dII, dand dIII
Answer: dA d d Level: dMedium d d LO: d2
24. Which dof dfollowing dwould dnormally dbe dfound don da dmanufacturing
dcompany's dorganization dchart?
A) the dlayout dof dthe dfactory dassembly dlines
B) a dlist dof dthe dmaterials dneeded dto dproduce deach dof dthe dcompany's dproducts
C) the dinformal dlines dof dreporting dand dcommunication
D) none dof dthe dabove
Answer: dD d d Level: dEasy d d LO: d2
6 Garrison, Managerial Accounting, 12th Edition
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
,Multiple dChoice dQuestions
16. Management daccounting dfocuses dprimarily don dproviding ddata dfor:
A) internal duses dby dmanagers.
B) external duses dby dstockholders dand dcreditors.
C) external duses dby dthe dInternal dRevenue dService.
D) external duses dby dthe dSecurities dand dExchange dCommission.
Answer: dA d d Level: dEasy d d LO: d1
17. Managerial daccounting:
A) is dmore dfuture doriented dthan dfinancial daccounting.
B) tends dto dsummarize dinformation dmore dthan dfinancial daccounting
C) is dprimarily dconcerned dwith dproviding dinformation dto dexternal dusers.
D) is dmore dconcerned dwith dprecision dthan dtimeliness.
Answer: dA d d Level: dEasy d d LO: d1
18. Compared dto dfinancial daccounting, dmanagerial daccounting dplaces dmore demphasis don:
A) the dflexibility dof dinformation.
B) the dprecision dof dinformation.
C) the dtimeliness dof dinformation.
D) both dA dand dC dabove.
Answer: dD d d Level: dEasy d d LO: d1
19. The dfunction dof dmanagement dthat dcompares dplanned dresults dto dactual dresults dis
dknown das:
A) planning.
B) directing dand dmotivating.
C) controlling.
D) decision dmaking.
Answer: dC d d Level: dEasy d d LO: d2
20. Which dof dthe dfunctions dof dmanagement dinvolves doverseeing dday-to-day dactivities?
A) Planning
B) Directing dand dmotivating
C) Controlling
D) Decision dmaking
Answer: dB d d Level: dEasy d d LO: d2
Garrison, Managerial Accounting, 12th Edition 5
, Chapter 1 Managerial Accounting and the Business Environment
21. Which dof dthe dfollowing dis dnot done dof dthe dthree dbasic dactivities dof da dmanager?
A) Planning
B) Controlling
C) Directing dand dmotivating
D) Compiling dmanagement daccounting
dreports dAnswer: dD d Level: dEasy d LO: d2
22. The ddelegation dof ddecision dmaking dto dlower dlevels din dan dorganization dis dknown das:
A) the dplanning dand dcontrol dcycle.
B) controlling.
C) decentralization.
D) none dof dthese.
Answer: dC d d Level: dEasy d d LO: d2
23. Which dof dthe dfollowing dstatements dare dfalse dconcerning dline dand dstaff dfunctions?
I. Persons doccupying dstaff dfunctions dhave dauthority dover dpersons doccupying
dline dfunctions.
II. Both dline dand dstaff dfunctions dare ddepicted don dthe dorganization dchart.
III. Line dfunctions dare ddirectly drelated dto dthe dbasic dobjectives dof dan dorganization.
A) Only dI
B) Only dII
C) Only dI dand dII
D) I, dII, dand dIII
Answer: dA d d Level: dMedium d d LO: d2
24. Which dof dfollowing dwould dnormally dbe dfound don da dmanufacturing
dcompany's dorganization dchart?
A) the dlayout dof dthe dfactory dassembly dlines
B) a dlist dof dthe dmaterials dneeded dto dproduce deach dof dthe dcompany's dproducts
C) the dinformal dlines dof dreporting dand dcommunication
D) none dof dthe dabove
Answer: dD d d Level: dEasy d d LO: d2
6 Garrison, Managerial Accounting, 12th Edition
