MHA 706 FINAL COMPREHENSIVE TEST
PAPER 2026 QUESTIONS WITH ANSWERS
GRADED A+
⫸ cost pool Answer: Overhead amount to be allocated.
Consists of the direct costs of one overhead department
⫸ cost driver Answer: The basis on which a cost pool is allocated; for
example, square footage for facilities costs.
⫸ Direct Method Answer: Cost allocation method in which the costs of
each support department are allocated directly to, and only to, the patient
services department
⫸ Step-down method Answer: a cost allocation method that recognizes
some of the overhead services provided by one support department to
another
⫸ Reciprocal Method Answer: A method that simultaneously allocates
service costs to all user departments. It gives full consideration to
interactions among support departments.
⫸ Charge-to-cost ratio (CCR) Answer: ties overhead resource
consumption to charges (or revenues)
, ⫸ Relative Value Unit (RVU) Answer: ties the use of overhead
resources to the complexity and time required for each service as
measured by RVUs
⫸ Activity-based costing (ABC) Answer: A method of cost accounting
designed to identify streams of activity and then to allocate costs
differently in different service lines
⫸ price setter Answer: provider has market dominance and can set it's
own prices
⫸ price takers Answer: perfectly competitive markets, payer
dominance, government programs
⫸ Full-cost pricing Answer: Prices are set to cover all costs associated
with providing a particular service (direct and indirect costs), typically
adds a profit component
⫸ marginal cost pricing Answer: prices for a service are set to cover
incremental, or marginal, costs (generally recovering only direct variable
costs)
⫸ target costing Answer: revenues are projected assuming prices as
given in the marketplace, required profits are subtracted from revenues,
remainder is target cost level
PAPER 2026 QUESTIONS WITH ANSWERS
GRADED A+
⫸ cost pool Answer: Overhead amount to be allocated.
Consists of the direct costs of one overhead department
⫸ cost driver Answer: The basis on which a cost pool is allocated; for
example, square footage for facilities costs.
⫸ Direct Method Answer: Cost allocation method in which the costs of
each support department are allocated directly to, and only to, the patient
services department
⫸ Step-down method Answer: a cost allocation method that recognizes
some of the overhead services provided by one support department to
another
⫸ Reciprocal Method Answer: A method that simultaneously allocates
service costs to all user departments. It gives full consideration to
interactions among support departments.
⫸ Charge-to-cost ratio (CCR) Answer: ties overhead resource
consumption to charges (or revenues)
, ⫸ Relative Value Unit (RVU) Answer: ties the use of overhead
resources to the complexity and time required for each service as
measured by RVUs
⫸ Activity-based costing (ABC) Answer: A method of cost accounting
designed to identify streams of activity and then to allocate costs
differently in different service lines
⫸ price setter Answer: provider has market dominance and can set it's
own prices
⫸ price takers Answer: perfectly competitive markets, payer
dominance, government programs
⫸ Full-cost pricing Answer: Prices are set to cover all costs associated
with providing a particular service (direct and indirect costs), typically
adds a profit component
⫸ marginal cost pricing Answer: prices for a service are set to cover
incremental, or marginal, costs (generally recovering only direct variable
costs)
⫸ target costing Answer: revenues are projected assuming prices as
given in the marketplace, required profits are subtracted from revenues,
remainder is target cost level
