MHA 706 Final Exam
Indirect Costs - answer Are costs associated with shared resources used by the entire
organization
Cost Driver - answer Is the basis on which the cost pool will be allocated
Cost Pool - answer Is the overhead amount to be allocated
Overhead departments - answer Are often called costs centers
Patient Service Departments - answer Are often called revenue centers
Direct Costs - answerAre costs unique and exclusive to a department
When you divide the "Dollars in the Cost Pool" by "Total Volume of Cost Driver" - you
have determined .... - answerThe Allocation Rate
Effective cost drivers should have the following characteristic(s) - answer-Perceived as
being fair
-Promote Organizational Cost Reduction
Which of the following is NOT a type of allocation method. - answerstep-up method
As an Accounting Manager - you are responsible for allocating the cost of Facilities to
other departments. What would be an appropriate cost driver for you to use for this
allocation. - answerSquare footage of the department
Once a company uses the direct method to allocate indirect costs to revenue-producing
departments within the facility - the total level of expenses decreases for the
organization. - answerFalse
When using the direct cost allocation system - often you are allocating the cost of xxxx
to Patient Service Departments - answerSupport (overhead) departments
Select all of the following options that are accounting methods to account for "costs" at
an individual service level - answerActivity Based Costing (ABC)
Relative Value Unit (RVU)
Time-Driven Activity Based Costing (TDABC)
Cost-to-Charge Ratio (CCR)
Select all of the true assumption(s) of the Cost-to-Charge Ratio Method. - answerEach
service consumes overhead costs in the same proportion as the department as a whole
, Charges reflect the level of intensity of the service provided
Activity based costing (ABC) begins with the ..... that comprise the service provided. -
answerIndividual Activities
The key to cost allocation under Activity-Based-Costing is to identify the activities that
are performed to provide a particular service and then aggregate the costs of the
activities. The steps required to implement ABC are as follows: - answerCollect- activity
data for each service
Identify- the relevant activities
Estimate- the cost of each activity
Assign- cost drivers for each activities
Calculate- the total costs of the service by aggregating activity costs
One use of managerial accounting information within a health service organization is
to... - answer-Determine the profitability of different service lines
-Identify the lowest feasible price when prices are negotiated
-Set prices on services
When a provider has market dominance, and can set its own prices (within reason), it is
said to be a price setter. In other situations, providers are price takers. Select the
responses that may describe a situation where a provider is a "price-taker." - answer-
There is payer dominance
-It is a perfectly competitive market
-The provider is dealing with a government payer/program
Under marginal cost pricing, prices for a service are set to cover .... costs -
answerincremental
Target costing is used by - answerprice takers
Scenario analysis - answeris a technique in which alternative scenarios are analyzed
Capitation rates are quoted - answerper member per month basis
To break-even, revenues - answermust equal total costs
The interest rate is described as the ..... on a debt security. - answercost of capital
Select all the "corporate" bond types - answermortgage bonds, debenture bonds,
subordinated debenture bonds
Bond contracts typically contain the following.... - answerMaturity agreements, Interest
rate and type, Restrictive covenant, Trustee designation
The financial value of an asset stems... - answerfrom the asset's expected cash flows
Indirect Costs - answer Are costs associated with shared resources used by the entire
organization
Cost Driver - answer Is the basis on which the cost pool will be allocated
Cost Pool - answer Is the overhead amount to be allocated
Overhead departments - answer Are often called costs centers
Patient Service Departments - answer Are often called revenue centers
Direct Costs - answerAre costs unique and exclusive to a department
When you divide the "Dollars in the Cost Pool" by "Total Volume of Cost Driver" - you
have determined .... - answerThe Allocation Rate
Effective cost drivers should have the following characteristic(s) - answer-Perceived as
being fair
-Promote Organizational Cost Reduction
Which of the following is NOT a type of allocation method. - answerstep-up method
As an Accounting Manager - you are responsible for allocating the cost of Facilities to
other departments. What would be an appropriate cost driver for you to use for this
allocation. - answerSquare footage of the department
Once a company uses the direct method to allocate indirect costs to revenue-producing
departments within the facility - the total level of expenses decreases for the
organization. - answerFalse
When using the direct cost allocation system - often you are allocating the cost of xxxx
to Patient Service Departments - answerSupport (overhead) departments
Select all of the following options that are accounting methods to account for "costs" at
an individual service level - answerActivity Based Costing (ABC)
Relative Value Unit (RVU)
Time-Driven Activity Based Costing (TDABC)
Cost-to-Charge Ratio (CCR)
Select all of the true assumption(s) of the Cost-to-Charge Ratio Method. - answerEach
service consumes overhead costs in the same proportion as the department as a whole
, Charges reflect the level of intensity of the service provided
Activity based costing (ABC) begins with the ..... that comprise the service provided. -
answerIndividual Activities
The key to cost allocation under Activity-Based-Costing is to identify the activities that
are performed to provide a particular service and then aggregate the costs of the
activities. The steps required to implement ABC are as follows: - answerCollect- activity
data for each service
Identify- the relevant activities
Estimate- the cost of each activity
Assign- cost drivers for each activities
Calculate- the total costs of the service by aggregating activity costs
One use of managerial accounting information within a health service organization is
to... - answer-Determine the profitability of different service lines
-Identify the lowest feasible price when prices are negotiated
-Set prices on services
When a provider has market dominance, and can set its own prices (within reason), it is
said to be a price setter. In other situations, providers are price takers. Select the
responses that may describe a situation where a provider is a "price-taker." - answer-
There is payer dominance
-It is a perfectly competitive market
-The provider is dealing with a government payer/program
Under marginal cost pricing, prices for a service are set to cover .... costs -
answerincremental
Target costing is used by - answerprice takers
Scenario analysis - answeris a technique in which alternative scenarios are analyzed
Capitation rates are quoted - answerper member per month basis
To break-even, revenues - answermust equal total costs
The interest rate is described as the ..... on a debt security. - answercost of capital
Select all the "corporate" bond types - answermortgage bonds, debenture bonds,
subordinated debenture bonds
Bond contracts typically contain the following.... - answerMaturity agreements, Interest
rate and type, Restrictive covenant, Trustee designation
The financial value of an asset stems... - answerfrom the asset's expected cash flows
