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
,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
as:
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
functions.
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
organization 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
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
,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
as:
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
functions.
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
organization 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
