- A
Place the production subscriptions under a dedicated management group so inherited policy and RBAC can be applied once.
Management groups are the right abstraction for organizing subscriptions that share governance requirements. Assigning policy and RBAC at that level lets the enterprise apply a baseline once and have it flow to child subscriptions automatically. This is the strongest fit for enterprise-wide production governance.
- B
Use tags such as Application or CostCenter on resources or resource groups for chargeback and reporting.
Tags are ideal for cost allocation and application-level reporting because they travel with the resource metadata and can be queried by reporting tools. They are flexible enough to classify items across many resource groups and subscriptions, making them a practical choice for finance reporting.
- C
Place all production workloads into one shared resource group so governance and reporting are simpler.
Why wrong: A single shared resource group is a poor design for a multi-application environment. It creates large administrative boundaries, complicates lifecycle management, and makes deployments riskier. It does not provide a scalable governance or reporting model for separate applications.
- D
Use management groups instead of tags because tags are not useful for cost reporting.
Why wrong: Management groups help with hierarchical governance, but they do not replace tags for application-level chargeback. Tags are specifically useful for cost and ownership metadata. This answer incorrectly treats the two concepts as interchangeable.
- E
Assign the baseline only at one subscription and copy the settings manually to every new subscription.
Why wrong: Manual copying creates drift and operational overhead, especially as subscriptions are added over time. The requirement calls for automatic inheritance, so this approach does not satisfy the need for a repeatable production baseline across current and future subscriptions.
Quick Answer
The answer is to place production subscriptions under a dedicated management group and use tags such as Application or CostCenter on resources or resource groups for chargeback and reporting. This works because a management group hierarchy allows you to apply a governance baseline via Azure Policy and RBAC at the management group scope, which automatically inherits to all current and future production subscriptions, ensuring consistent enforcement without manual updates. Meanwhile, tagging resources or resource groups by application enables finance to aggregate cost reporting across many resource groups, directly meeting the requirement for cost reporting by application. On the AZ-104 exam, this question tests your understanding of how management groups enforce policy inheritance versus how tags enable flexible cost allocation—a common trap is confusing tagging with policy enforcement. Remember the mnemonic: “Group for governance, tag for tracking.”
AZ-104 Manage Azure Identities and Governance Practice Question
This AZ-104 practice question tests your understanding of manage azure identities and governance. Match the stated requirement to the specific cloud service, access model, or configuration option — many options are valid in isolation but not for this scenario. After answering, compare your reasoning against the explanation and wrong-answer breakdown below. Once you have made your selection, read the full explanation to reinforce the concept and understand why each distractor is designed to mislead on exam day.
Your company wants one governance baseline to apply automatically to all current and future production subscriptions, and finance wants cost reporting by application across many resource groups. Which two design choices best satisfy the requirements? Select two.
Clue words in this question
Noticing these words before you look at the options changes how you read each choice.
Clue:
"best"Why it matters: Signals that multiple options may be partially correct. Choose the option that most directly solves the exact problem described, not the one that sounds most complete.
Answer choices
Why each option matters
Answer the question above first, then reveal the full breakdown to understand why each option is right or wrong.
Correct answer & explanation
Place the production subscriptions under a dedicated management group so inherited policy and RBAC can be applied once.
Option A is correct because placing production subscriptions under a dedicated management group allows you to apply Azure Policy and Azure RBAC at the management group scope, which automatically inherits to all current and future subscriptions within that hierarchy. This ensures a consistent governance baseline without manual intervention for new subscriptions.
Key principle: Answer the scenario, not the keyword: identify the specific constraint before choosing the most familiar-sounding option.
Answer analysis
Option-by-option breakdown
For each option: why learners choose it and why it is or isn't the right answer here.
- ✓
Place the production subscriptions under a dedicated management group so inherited policy and RBAC can be applied once.
Why this is correct
Management groups are the right abstraction for organizing subscriptions that share governance requirements. Assigning policy and RBAC at that level lets the enterprise apply a baseline once and have it flow to child subscriptions automatically. This is the strongest fit for enterprise-wide production governance.
Clue confirmation
The clue word "best" in the question point toward this answer.
Related concept
Read the scenario before looking for a memorised answer.
- ✓
Use tags such as Application or CostCenter on resources or resource groups for chargeback and reporting.
Why this is correct
Tags are ideal for cost allocation and application-level reporting because they travel with the resource metadata and can be queried by reporting tools. They are flexible enough to classify items across many resource groups and subscriptions, making them a practical choice for finance reporting.
Clue confirmation
The clue word "best" in the question point toward this answer.
Related concept
Read the scenario before looking for a memorised answer.
- ✗
Place all production workloads into one shared resource group so governance and reporting are simpler.
Why it's wrong here
A single shared resource group is a poor design for a multi-application environment. It creates large administrative boundaries, complicates lifecycle management, and makes deployments riskier. It does not provide a scalable governance or reporting model for separate applications.
- ✗
Use management groups instead of tags because tags are not useful for cost reporting.
Why it's wrong here
Management groups help with hierarchical governance, but they do not replace tags for application-level chargeback. Tags are specifically useful for cost and ownership metadata. This answer incorrectly treats the two concepts as interchangeable.
- ✗
Assign the baseline only at one subscription and copy the settings manually to every new subscription.
Why it's wrong here
Manual copying creates drift and operational overhead, especially as subscriptions are added over time. The requirement calls for automatic inheritance, so this approach does not satisfy the need for a repeatable production baseline across current and future subscriptions.
Common exam traps
Common exam trap: answer the scenario, not the keyword
The trap here is that candidates may confuse management groups and tags as mutually exclusive, when in fact they are complementary: management groups enforce governance inheritance, while tags enable granular cost reporting and chargeback.
Detailed technical explanation
How to think about this question
Azure Policy at the management group scope uses inheritance to apply definitions (e.g., allowed regions, resource SKUs) to all nested subscriptions and resource groups. For cost reporting, Azure Cost Management supports grouping and filtering by custom tags, enabling finance to allocate costs by application across resource groups. Tags are not inherited from management groups, so they must be applied directly to resources or resource groups, often enforced via Azure Policy (e.g., 'require tag and its value on resources').
KKey Concepts to Remember
- Read the scenario before looking for a memorised answer.
- Find the constraint that changes the correct option.
- Eliminate answers that are true in general but not in this case.
TExam Day Tips
- Watch for words such as best, first, most likely and least administrative effort.
- Review why wrong options are wrong, not only why the correct option is correct.
Key takeaway
Answer the scenario, not the keyword: identify the specific constraint before choosing the most familiar-sounding option.
Real-world example
How this comes up in practice
A startup's cloud architect reviews their monthly bill and notices costs are higher than expected for a long-running batch job. Switching from on-demand instances to Reserved Instances — or using Spot/Preemptible VMs — can reduce compute costs by up to 72 %. Questions like this test whether you understand the tradeoffs between commitment, flexibility, and cost across cloud pricing models.
What to study next
Got this wrong? Here's your next step.
Identify which exam domain this question belongs to, review the core concept, then practise similar questions from the same domain.
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FAQ
Questions learners often ask
What does this AZ-104 question test?
Manage Azure Identities and Governance — This question tests Manage Azure Identities and Governance — Read the scenario before looking for a memorised answer..
What is the correct answer to this question?
The correct answer is: Place the production subscriptions under a dedicated management group so inherited policy and RBAC can be applied once. — Option A is correct because placing production subscriptions under a dedicated management group allows you to apply Azure Policy and Azure RBAC at the management group scope, which automatically inherits to all current and future subscriptions within that hierarchy. This ensures a consistent governance baseline without manual intervention for new subscriptions.
What should I do if I get this AZ-104 question wrong?
Identify which exam domain this question belongs to, review the core concept, then practise similar questions from the same domain.
Are there clue words in this question I should notice?
Yes — watch for: "best". Signals that multiple options may be partially correct. Choose the option that most directly solves the exact problem described, not the one that sounds most complete.
What is the key concept behind this question?
Read the scenario before looking for a memorised answer.
About these practice questions
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Last reviewed: Jun 11, 2026
This AZ-104 practice question is part of Courseiva's free Microsoft certification practice question bank. Courseiva provides original exam-style practice questions with explanations, topic-based practice, mock exams, readiness tracking, and study analytics to help learners prepare for the AZ-104 exam.
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