The answers are in bold
Garrison, Chapter 1: Managerial Accounting
What is the primary focus of managerial accounting? a) Providing information to external users
like investors and creditors b) Assisting managers in making internal decisions c) Ensuring
compliance with Generally Accepted Accounting Principles (GAAP) d) Preparing financial
statements for tax purposes
Which of the following is NOT a characteristic of managerial accounting information? a)
Future-oriented b) Relevant c) Verifiable d) Timely
Which of the following is a key difference between managerial and financial accounting? a)
Managerial accounting focuses on the past, while financial accounting focuses on the future b)
Managerial accounting is mandatory, while financial accounting is optional c) Managerial
accounting emphasizes relevance, while financial accounting emphasizes precision d)
Managerial accounting is governed by GAAP, while financial accounting is not
The process of identifying, measuring, analyzing, interpreting, and communicating information
for the pursuit of an organization's goals is known as: a) Financial accounting b) Cost accounting
c) Managerial accounting d) Auditing
Which of the following is NOT a primary activity of a manager? a) Planning b) Directing and
motivating c) Controlling d) Investing
A budget is an example of which managerial activity? a) Planning b) Directing and motivating
c) Controlling d) Decision making
Comparing actual results to budgeted amounts is an example of which managerial activity? a)
Planning b) Directing and motivating c) Controlling d) Decision making
Which of the following is a benefit of managerial accounting? a) Improved decision making b)
Enhanced operational efficiency c) Increased profitability d) All of the above
The set of activities required to design, develop, produce, market, and deliver products and
services to customers is known as the: a) Supply chain b) Value chain c) Production process d)
Distribution network
Which of the following is NOT a component of the value chain? a) Research and development
b) Customer service c) Marketing and sales d) Production
Costs that are incurred to support the entire company and not readily traced to individual
products or services are called: a) Direct costs b) Indirect costs c) Variable costs d) Fixed costs
, Which of the following is an example of a direct cost? a) Factory rent b) Direct materials c)
Supervisor salary d) Utilities
Costs that change in total in direct proportion to changes in activity levels are called: a) Fixed
costs b) Variable costs c) Mixed costs d) Step costs
Costs that remain constant in total within a relevant range of activity are called: a) Fixed costs
b) Variable costs c) Mixed costs d) Step costs
A cost that contains both fixed and variable components is called a: a) Direct cost b) Indirect
cost c) Mixed cost d) Step cost
The range of activity within which assumptions about cost behavior are valid is called the: a)
Cost driver b) Relevant range c) Break-even point d) Margin of safety
A cost that has already been incurred and cannot be changed by any decision made now or in
the future is called a: a) Sunk cost b) Opportunity cost c) Differential cost d) Avoidable cost
The potential benefit that is given up when one alternative is selected over another is called an:
a) Sunk cost b) Opportunity cost c) Differential cost d) Avoidable cost
A cost that differs between alternatives is called a: a) Sunk cost b) Opportunity cost c)
Differential cost d) Avoidable cost
The contribution margin is calculated as: a) Sales revenue - variable costs b) Sales revenue -
fixed costs c) Sales revenue - total costs d) Variable costs - fixed costs
Which of the following is NOT a cost object? a) A product b) A department c) A customer's
satisfaction level d) A service
The wages of factory workers who directly work on the product are classified as: a)
Manufacturing overhead b) Direct labor c) Indirect labor d) Period costs
Costs that are expensed in the period in which they are incurred are called: a) Product costs b)
Period costs c) Manufacturing costs d) Prime costs
Which of the following is an example of a period cost? a) Direct materials b) Direct labor c)
Selling expenses d) Manufacturing overhead
The total of direct materials, direct labor, and manufacturing overhead incurred during a period
is known as: a) Prime cost b) Conversion cost c) Total manufacturing cost d) Period cost
The cost of goods manufactured is calculated as: a) Beginning work in process inventory + total
manufacturing costs - ending work in process inventory b) Beginning finished goods inventory
+ cost of goods manufactured - ending finished goods inventory c) Direct materials + direct
labor + manufacturing overhead d) Sales revenue - cost of goods sold
Garrison, Chapter 1: Managerial Accounting
What is the primary focus of managerial accounting? a) Providing information to external users
like investors and creditors b) Assisting managers in making internal decisions c) Ensuring
compliance with Generally Accepted Accounting Principles (GAAP) d) Preparing financial
statements for tax purposes
Which of the following is NOT a characteristic of managerial accounting information? a)
Future-oriented b) Relevant c) Verifiable d) Timely
Which of the following is a key difference between managerial and financial accounting? a)
Managerial accounting focuses on the past, while financial accounting focuses on the future b)
Managerial accounting is mandatory, while financial accounting is optional c) Managerial
accounting emphasizes relevance, while financial accounting emphasizes precision d)
Managerial accounting is governed by GAAP, while financial accounting is not
The process of identifying, measuring, analyzing, interpreting, and communicating information
for the pursuit of an organization's goals is known as: a) Financial accounting b) Cost accounting
c) Managerial accounting d) Auditing
Which of the following is NOT a primary activity of a manager? a) Planning b) Directing and
motivating c) Controlling d) Investing
A budget is an example of which managerial activity? a) Planning b) Directing and motivating
c) Controlling d) Decision making
Comparing actual results to budgeted amounts is an example of which managerial activity? a)
Planning b) Directing and motivating c) Controlling d) Decision making
Which of the following is a benefit of managerial accounting? a) Improved decision making b)
Enhanced operational efficiency c) Increased profitability d) All of the above
The set of activities required to design, develop, produce, market, and deliver products and
services to customers is known as the: a) Supply chain b) Value chain c) Production process d)
Distribution network
Which of the following is NOT a component of the value chain? a) Research and development
b) Customer service c) Marketing and sales d) Production
Costs that are incurred to support the entire company and not readily traced to individual
products or services are called: a) Direct costs b) Indirect costs c) Variable costs d) Fixed costs
, Which of the following is an example of a direct cost? a) Factory rent b) Direct materials c)
Supervisor salary d) Utilities
Costs that change in total in direct proportion to changes in activity levels are called: a) Fixed
costs b) Variable costs c) Mixed costs d) Step costs
Costs that remain constant in total within a relevant range of activity are called: a) Fixed costs
b) Variable costs c) Mixed costs d) Step costs
A cost that contains both fixed and variable components is called a: a) Direct cost b) Indirect
cost c) Mixed cost d) Step cost
The range of activity within which assumptions about cost behavior are valid is called the: a)
Cost driver b) Relevant range c) Break-even point d) Margin of safety
A cost that has already been incurred and cannot be changed by any decision made now or in
the future is called a: a) Sunk cost b) Opportunity cost c) Differential cost d) Avoidable cost
The potential benefit that is given up when one alternative is selected over another is called an:
a) Sunk cost b) Opportunity cost c) Differential cost d) Avoidable cost
A cost that differs between alternatives is called a: a) Sunk cost b) Opportunity cost c)
Differential cost d) Avoidable cost
The contribution margin is calculated as: a) Sales revenue - variable costs b) Sales revenue -
fixed costs c) Sales revenue - total costs d) Variable costs - fixed costs
Which of the following is NOT a cost object? a) A product b) A department c) A customer's
satisfaction level d) A service
The wages of factory workers who directly work on the product are classified as: a)
Manufacturing overhead b) Direct labor c) Indirect labor d) Period costs
Costs that are expensed in the period in which they are incurred are called: a) Product costs b)
Period costs c) Manufacturing costs d) Prime costs
Which of the following is an example of a period cost? a) Direct materials b) Direct labor c)
Selling expenses d) Manufacturing overhead
The total of direct materials, direct labor, and manufacturing overhead incurred during a period
is known as: a) Prime cost b) Conversion cost c) Total manufacturing cost d) Period cost
The cost of goods manufactured is calculated as: a) Beginning work in process inventory + total
manufacturing costs - ending work in process inventory b) Beginning finished goods inventory
+ cost of goods manufactured - ending finished goods inventory c) Direct materials + direct
labor + manufacturing overhead d) Sales revenue - cost of goods sold
