MHA 706 FINAL CERTIFICATION REVIEW
SET 2026 QUESTIONS WITH ANSWERS
GRADED A+
⫸ Indirect costs (overheads) Answer: Costs associated with shared
resources used by the entire organization
Ex-costs associated with central services such as human resources and
finance
⫸ Cost Allocation Answer: Assign all overhead costs to the
departments that create the need for such costs, typically the patient
services departments.
⫸ Cost Pool Answer: Overhead amount to be allocated.
Consists of the direct costs of one overhead department.
Ex- HR Cost.
⫸ cost driver Answer: Basis on which the cost pool will be allocated.
Ex- the cost driver for facilities overhead (building space depreciation,
maintenance, utilities, and so on) might be the amount of space used by
each department that uses the organization's facilities.
, ⫸ Cost Allocation Rate Answer: dividing # of dollars in cash pool/total
volume of cost driver
⫸ What makes a good cost driver? Answer: Perceived as being fair and
promote organizational cost reduction.
Assume that the cost driver for Housekeeping Services is the amount of
space occupied. User departments in total occupy 200,000 square feet of
space.
⫸ Direct cost allocation method Answer: the costs of each support
department are allocated directly to, and only to, the patient services
departments.
⫸ Step-down allocation method Answer: allocates support-department
costs to other support departments and to operating departments in a
sequential manner that partially recognizes the mutual services provided
among all support departments
⫸ What is the most used Cost Allocation Method? Answer: Step-down
method is used more because it recognizes at least some of those interest
support department relationships. So, it's a fairer in efficient way of
doing the allocation.
SET 2026 QUESTIONS WITH ANSWERS
GRADED A+
⫸ Indirect costs (overheads) Answer: Costs associated with shared
resources used by the entire organization
Ex-costs associated with central services such as human resources and
finance
⫸ Cost Allocation Answer: Assign all overhead costs to the
departments that create the need for such costs, typically the patient
services departments.
⫸ Cost Pool Answer: Overhead amount to be allocated.
Consists of the direct costs of one overhead department.
Ex- HR Cost.
⫸ cost driver Answer: Basis on which the cost pool will be allocated.
Ex- the cost driver for facilities overhead (building space depreciation,
maintenance, utilities, and so on) might be the amount of space used by
each department that uses the organization's facilities.
, ⫸ Cost Allocation Rate Answer: dividing # of dollars in cash pool/total
volume of cost driver
⫸ What makes a good cost driver? Answer: Perceived as being fair and
promote organizational cost reduction.
Assume that the cost driver for Housekeeping Services is the amount of
space occupied. User departments in total occupy 200,000 square feet of
space.
⫸ Direct cost allocation method Answer: the costs of each support
department are allocated directly to, and only to, the patient services
departments.
⫸ Step-down allocation method Answer: allocates support-department
costs to other support departments and to operating departments in a
sequential manner that partially recognizes the mutual services provided
among all support departments
⫸ What is the most used Cost Allocation Method? Answer: Step-down
method is used more because it recognizes at least some of those interest
support department relationships. So, it's a fairer in efficient way of
doing the allocation.
