MHA 706 FINAL 2 EXAM QUESTIONS AND ANSWERS
WITH COMPLETE SOLUTIONS VERIFIED
cost allocation
assign all overhead costs to the departments that create the need for such costs,
typically the patient services department
cost pool
Overhead amount to be allocated.
Consists of the direct costs of one overhead department
cost driver
The basis on which a cost pool is allocated; for example, square footage for facilities
costs.
Direct Method
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
a cost allocation method that recognizes some of the overhead services provided by
one support department to another
Reciprocal Method
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)
ties overhead resource consumption to charges (or revenues)
, Relative Value Unit (RVU)
ties the use of overhead resources to the complexity and time required for each service
as measured by RVUs
Activity-based costing (ABC)
A method of cost accounting designed to identify streams of activity and then to allocate
costs differently in different service lines
price setter
provider has market dominance and can set it's own prices
price takers
perfectly competitive markets, payer dominance, government programs
Full-cost pricing
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
prices for a service are set to cover incremental, or marginal, costs (generally
recovering only direct variable costs)
target costing
revenues are projected assuming prices as given in the marketplace, required profits
are subtracted from revenues, remainder is target cost level
term loan
a bank loan that lasts for a specific term
term loan examples
student loans, mortgage
WITH COMPLETE SOLUTIONS VERIFIED
cost allocation
assign all overhead costs to the departments that create the need for such costs,
typically the patient services department
cost pool
Overhead amount to be allocated.
Consists of the direct costs of one overhead department
cost driver
The basis on which a cost pool is allocated; for example, square footage for facilities
costs.
Direct Method
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
a cost allocation method that recognizes some of the overhead services provided by
one support department to another
Reciprocal Method
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)
ties overhead resource consumption to charges (or revenues)
, Relative Value Unit (RVU)
ties the use of overhead resources to the complexity and time required for each service
as measured by RVUs
Activity-based costing (ABC)
A method of cost accounting designed to identify streams of activity and then to allocate
costs differently in different service lines
price setter
provider has market dominance and can set it's own prices
price takers
perfectly competitive markets, payer dominance, government programs
Full-cost pricing
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
prices for a service are set to cover incremental, or marginal, costs (generally
recovering only direct variable costs)
target costing
revenues are projected assuming prices as given in the marketplace, required profits
are subtracted from revenues, remainder is target cost level
term loan
a bank loan that lasts for a specific term
term loan examples
student loans, mortgage
