LSUS MHA 706 FINAL EXAM 2025 | FINANCIAL MANAGEMENT
MIDTERM | ALL QUESTIONS AND CORRECT ANSWERS |
ALREADY GRADED A+ | PROFESSOR VERIFIED
Question 1
Cost Driver is the...
A) Total dollar amount to be distributed.
B) Basis cost pool will be allocated.
C) Department generating the most expenses.
D) Method for tracking direct costs.
E) Final cost assigned to a service.
Correct Answer: B) basis cost pool will be allocated
Rationale: A cost driver is the factor (e.g., square footage, number of procedures)
that causes or relates to the incurrence of a cost, used as the basis for allocating
that cost.
Question 2
Cost Pool is the...
A) Sum of all direct costs.
B) Total revenue generated by a department.
C) Overhead amount to be allocated.
D) Profit margin for a specific service.
E) Cost of raw materials.
Correct Answer: C) overhead amount to be allocated
Rationale: A cost pool is a grouping of individual costs, typically overhead or indirect
costs, that will be allocated to various cost objects (e.g., departments, services).
Question 3
Overhead Departments are...
A) Always profitable.
B) Directly involved in patient care.
C) Often called cost centers.
D) Easily identified as revenue generators.
E) Exclusively involved in marketing.
Correct Answer: C) often called cost centers
,Rationale: Overhead departments, such as administrative or facilities departments,
primarily incur costs without directly generating revenue, hence their designation
as cost centers.
Question 4
Indirect Costs are...
A) Costs unique and exclusive to a department.
B) Directly tied to revenue generation.
C) Costs of shared resources used by the entire organization.
D) Always variable costs.
E) Easily traceable to a specific service.
Correct Answer: C) Costs of shared resources used by the entire organization
Rationale: Indirect costs are those that cannot be directly traced to a specific cost
object (e.g., department, service) but benefit multiple parts of the organization.
Question 5
Patient Service Departments are...
A) Exclusively administrative.
B) Often called revenue centers.
C) Not responsible for generating income.
D) Primarily involved in regulatory compliance.
E) Always considered indirect cost centers.
Correct Answer: B) often called revenue centers
Rationale: Patient service departments, such as nursing units or surgical suites,
directly provide services to patients and thus generate revenue for the
organization.
Question 6
Direct Costs are...
A) Costs of shared resources used by the entire organization.
B) Always allocated using a cost driver.
C) Costs unique and exclusive to a department.
D) Difficult to trace to a specific service.
,E) Synonymous with indirect costs.
Correct Answer: C) costs unique and exclusive to a department
Rationale: Direct costs are expenditures that can be directly attributed to a specific
cost object, such as a department, service line, or patient.
Question 7
The formula "Dollars in the Cost Pool" / "Total Volume of Cost Driver" equals the:
A) Total cost of services.
B) Allocation Rate.
C) Overhead budget.
D) Departmental profit.
E) Revenue per unit.
Correct Answer: B) Allocation Rate
Rationale: This formula is used in cost allocation to determine how much of the cost
pool should be assigned for each unit of the cost driver.
Question 8
Effective cost drivers should have what characteristic(s)?
A) Be complex and difficult to understand.
B) Be arbitrary and easily manipulated.
C) Promote organizational cost reduction and be perceived as being fair.
D) Focus solely on revenue generation.
E) Increase administrative overhead.
Correct Answer: C) -Promote organizational cost reduction -Perceived as being fair
Rationale: An effective cost driver should encourage departments to manage the
costs associated with the driver and be seen as equitable by those receiving the
allocation.
Question 9
__________ is NOT a type of cost allocation method?
A) Direct Method
B) Step-Down Method
C) Reciprocal Method
, D) Step-Up Method
E) All of the above are allocation methods.
Correct Answer: D) Step-Up Method
Rationale: The three common cost allocation methods are Direct, Step-Down, and
Reciprocal. Step-Up is not a recognized method.
Question 10
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?
A) Number of employees in each department.
B) Revenue generated by each department.
C) Square footage of the department.
D) Number of patient visits.
E) Cost of housekeeping.
Correct Answer: C) -Square footage of the department -Housekeeping
Rationale: The square footage a department occupies is a logical and fair driver for
allocating facility-related costs like rent, utilities, and maintenance.
Question 11
TRUE/FALSE: Once a company uses the Direct Method to allocate costs to revenue-producing
departments within the facility, the total level of expenses decreases for the organization.
A) True
B) False
Correct Answer: B) False
Rationale: Cost allocation methods merely redistribute existing costs; they do not
change the total amount of expenses for the entire organization. The expenses are
simply assigned to different departments.
Question 12
When using the direct cost allocation system, often you are allocating the cost of __________
to Patient Service Departments.
A) Direct patient care supplies.
B) Support (overhead) Departments.
MIDTERM | ALL QUESTIONS AND CORRECT ANSWERS |
ALREADY GRADED A+ | PROFESSOR VERIFIED
Question 1
Cost Driver is the...
A) Total dollar amount to be distributed.
B) Basis cost pool will be allocated.
C) Department generating the most expenses.
D) Method for tracking direct costs.
E) Final cost assigned to a service.
Correct Answer: B) basis cost pool will be allocated
Rationale: A cost driver is the factor (e.g., square footage, number of procedures)
that causes or relates to the incurrence of a cost, used as the basis for allocating
that cost.
Question 2
Cost Pool is the...
A) Sum of all direct costs.
B) Total revenue generated by a department.
C) Overhead amount to be allocated.
D) Profit margin for a specific service.
E) Cost of raw materials.
Correct Answer: C) overhead amount to be allocated
Rationale: A cost pool is a grouping of individual costs, typically overhead or indirect
costs, that will be allocated to various cost objects (e.g., departments, services).
Question 3
Overhead Departments are...
A) Always profitable.
B) Directly involved in patient care.
C) Often called cost centers.
D) Easily identified as revenue generators.
E) Exclusively involved in marketing.
Correct Answer: C) often called cost centers
,Rationale: Overhead departments, such as administrative or facilities departments,
primarily incur costs without directly generating revenue, hence their designation
as cost centers.
Question 4
Indirect Costs are...
A) Costs unique and exclusive to a department.
B) Directly tied to revenue generation.
C) Costs of shared resources used by the entire organization.
D) Always variable costs.
E) Easily traceable to a specific service.
Correct Answer: C) Costs of shared resources used by the entire organization
Rationale: Indirect costs are those that cannot be directly traced to a specific cost
object (e.g., department, service) but benefit multiple parts of the organization.
Question 5
Patient Service Departments are...
A) Exclusively administrative.
B) Often called revenue centers.
C) Not responsible for generating income.
D) Primarily involved in regulatory compliance.
E) Always considered indirect cost centers.
Correct Answer: B) often called revenue centers
Rationale: Patient service departments, such as nursing units or surgical suites,
directly provide services to patients and thus generate revenue for the
organization.
Question 6
Direct Costs are...
A) Costs of shared resources used by the entire organization.
B) Always allocated using a cost driver.
C) Costs unique and exclusive to a department.
D) Difficult to trace to a specific service.
,E) Synonymous with indirect costs.
Correct Answer: C) costs unique and exclusive to a department
Rationale: Direct costs are expenditures that can be directly attributed to a specific
cost object, such as a department, service line, or patient.
Question 7
The formula "Dollars in the Cost Pool" / "Total Volume of Cost Driver" equals the:
A) Total cost of services.
B) Allocation Rate.
C) Overhead budget.
D) Departmental profit.
E) Revenue per unit.
Correct Answer: B) Allocation Rate
Rationale: This formula is used in cost allocation to determine how much of the cost
pool should be assigned for each unit of the cost driver.
Question 8
Effective cost drivers should have what characteristic(s)?
A) Be complex and difficult to understand.
B) Be arbitrary and easily manipulated.
C) Promote organizational cost reduction and be perceived as being fair.
D) Focus solely on revenue generation.
E) Increase administrative overhead.
Correct Answer: C) -Promote organizational cost reduction -Perceived as being fair
Rationale: An effective cost driver should encourage departments to manage the
costs associated with the driver and be seen as equitable by those receiving the
allocation.
Question 9
__________ is NOT a type of cost allocation method?
A) Direct Method
B) Step-Down Method
C) Reciprocal Method
, D) Step-Up Method
E) All of the above are allocation methods.
Correct Answer: D) Step-Up Method
Rationale: The three common cost allocation methods are Direct, Step-Down, and
Reciprocal. Step-Up is not a recognized method.
Question 10
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?
A) Number of employees in each department.
B) Revenue generated by each department.
C) Square footage of the department.
D) Number of patient visits.
E) Cost of housekeeping.
Correct Answer: C) -Square footage of the department -Housekeeping
Rationale: The square footage a department occupies is a logical and fair driver for
allocating facility-related costs like rent, utilities, and maintenance.
Question 11
TRUE/FALSE: Once a company uses the Direct Method to allocate costs to revenue-producing
departments within the facility, the total level of expenses decreases for the organization.
A) True
B) False
Correct Answer: B) False
Rationale: Cost allocation methods merely redistribute existing costs; they do not
change the total amount of expenses for the entire organization. The expenses are
simply assigned to different departments.
Question 12
When using the direct cost allocation system, often you are allocating the cost of __________
to Patient Service Departments.
A) Direct patient care supplies.
B) Support (overhead) Departments.
