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 aChoice aQuestions
16. Management aaccounting afocuses aprimarily aon aproviding adata afor:
A) internal auses aby amanagers.
B) external auses aby astockholders aand acreditors.
C) external auses aby athe aInternal aRevenue aService.
D) external auses aby athe aSecurities aand aExchange aCommission.
Answer: aA a a Level: aEasy a a LO: a1
17. Managerial aaccounting:
A) is amore afuture aoriented athan afinancial aaccounting.
B) tends ato asummarize ainformation amore athan afinancial aaccounting
C) is aprimarily aconcerned awith aproviding ainformation ato aexternal ausers.
D) is amore aconcerned awith aprecision athan atimeliness.
Answer: aA a a Level: aEasy a a LO: a1
18. Compared ato afinancial aaccounting, amanagerial aaccounting aplaces amore aemphasis aon:
A) the aflexibility aof ainformation.
B) the aprecision aof ainformation.
C) the atimeliness aof ainformation.
D) both aA aand aC aabove.
Answer: aD a a Level: aEasy a a LO: a1
19. The afunction aof amanagement athat acompares aplanned aresults ato aactual aresults ais
aknown aas:
A) planning.
B) directing aand amotivating.
C) controlling.
D) decision amaking.
Answer: aC a a Level: aEasy a a LO: a2
20. Which aof athe afunctions aof amanagement ainvolves aoverseeing aday-to-day aactivities?
A) Planning
B) Directing aand amotivating
C) Controlling
D) Decision amaking
Answer: aB a a Level: aEasy a a LO: a2
Garrison, Managerial Accounting, 12th Edition 5
, Chapter 1 Managerial Accounting and the Business Environment
21. Which aof athe afollowing ais anot aone aof athe athree abasic aactivities aof aa amanager?
A) Planning
B) Controlling
C) Directing aand amotivating
D) Compiling amanagement aaccounting
areports aAnswer: aD a Level: aEasy a LO: a2
22. The adelegation aof adecision amaking ato alower alevels ain aan aorganization ais aknown aas:
A) the aplanning aand acontrol acycle.
B) controlling.
C) decentralization.
D) none aof athese.
Answer: aC a a Level: aEasy a a LO: a2
23. Which aof athe afollowing astatements aare afalse aconcerning aline aand astaff afunctions?
I. Persons aoccupying astaff afunctions ahave aauthority aover apersons aoccupying
aline afunctions.
II. Both aline aand astaff afunctions aare adepicted aon athe aorganization achart.
III. Line afunctions aare adirectly arelated ato athe abasic aobjectives aof aan aorganization.
A) Only aI
B) Only aII
C) Only aI aand aII
D) I, aII, aand aIII
Answer: aA a a Level: aMedium a a LO: a2
24. Which aof afollowing awould anormally abe afound aon aa amanufacturing
acompany's aorganization achart?
A) the alayout aof athe afactory aassembly alines
B) a alist aof athe amaterials aneeded ato aproduce aeach aof athe acompany's aproducts
C) the ainformal alines aof areporting aand acommunication
D) none aof athe aabove
Answer: aD a a Level: aEasy a a LO: a2
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 aChoice aQuestions
16. Management aaccounting afocuses aprimarily aon aproviding adata afor:
A) internal auses aby amanagers.
B) external auses aby astockholders aand acreditors.
C) external auses aby athe aInternal aRevenue aService.
D) external auses aby athe aSecurities aand aExchange aCommission.
Answer: aA a a Level: aEasy a a LO: a1
17. Managerial aaccounting:
A) is amore afuture aoriented athan afinancial aaccounting.
B) tends ato asummarize ainformation amore athan afinancial aaccounting
C) is aprimarily aconcerned awith aproviding ainformation ato aexternal ausers.
D) is amore aconcerned awith aprecision athan atimeliness.
Answer: aA a a Level: aEasy a a LO: a1
18. Compared ato afinancial aaccounting, amanagerial aaccounting aplaces amore aemphasis aon:
A) the aflexibility aof ainformation.
B) the aprecision aof ainformation.
C) the atimeliness aof ainformation.
D) both aA aand aC aabove.
Answer: aD a a Level: aEasy a a LO: a1
19. The afunction aof amanagement athat acompares aplanned aresults ato aactual aresults ais
aknown aas:
A) planning.
B) directing aand amotivating.
C) controlling.
D) decision amaking.
Answer: aC a a Level: aEasy a a LO: a2
20. Which aof athe afunctions aof amanagement ainvolves aoverseeing aday-to-day aactivities?
A) Planning
B) Directing aand amotivating
C) Controlling
D) Decision amaking
Answer: aB a a Level: aEasy a a LO: a2
Garrison, Managerial Accounting, 12th Edition 5
, Chapter 1 Managerial Accounting and the Business Environment
21. Which aof athe afollowing ais anot aone aof athe athree abasic aactivities aof aa amanager?
A) Planning
B) Controlling
C) Directing aand amotivating
D) Compiling amanagement aaccounting
areports aAnswer: aD a Level: aEasy a LO: a2
22. The adelegation aof adecision amaking ato alower alevels ain aan aorganization ais aknown aas:
A) the aplanning aand acontrol acycle.
B) controlling.
C) decentralization.
D) none aof athese.
Answer: aC a a Level: aEasy a a LO: a2
23. Which aof athe afollowing astatements aare afalse aconcerning aline aand astaff afunctions?
I. Persons aoccupying astaff afunctions ahave aauthority aover apersons aoccupying
aline afunctions.
II. Both aline aand astaff afunctions aare adepicted aon athe aorganization achart.
III. Line afunctions aare adirectly arelated ato athe abasic aobjectives aof aan aorganization.
A) Only aI
B) Only aII
C) Only aI aand aII
D) I, aII, aand aIII
Answer: aA a a Level: aMedium a a LO: a2
24. Which aof afollowing awould anormally abe afound aon aa amanufacturing
acompany's aorganization achart?
A) the alayout aof athe afactory aassembly alines
B) a alist aof athe amaterials aneeded ato aproduce aeach aof athe acompany's aproducts
C) the ainformal alines aof areporting aand acommunication
D) none aof athe aabove
Answer: aD a a Level: aEasy a a LO: a2
6 Garrison, Managerial Accounting, 12th Edition
