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MHA 706 FINAL EXAM QUESTIONS
& ANSWERS ```
Question : Direct Costs
CORRECT ANSWER : Costs unique and exclusive to a
department. GENERATE REVENUE
Question : Indirect costs (overheads)
CORRECT ANSWER : Costs associated with shared
resources used by the entire organization
Question : Cost Allocation
CORRECT ANSWER : Assign all overhead costs to the
departments that create the need for such costs, typically the patient services departments.
Question : Cost Pool
CORRECT ANSWER : Overhead amount to be allocated.
Consists of the direct costs of one overhead department.
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Question : Cost driver
CORRECT ANSWER : Basis on which the cost pool will
be allocated.
Question : What makes a good cost driver?
CORRECT ANSWER : Perceived as being fair and
promote organizational cost reduction.
Question : 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.
CORRECT ANSWER :
Question : Direct cost allocation method
CORRECT ANSWER : The costs of each support
department are allocated directly to, and only to, the patient services departments.
Question : Step-down allocation method
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CORRECT 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
Question : What is the most used Cost Allocation
Method?
CORRECT 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.
Question : Reciprocal allocation method
CORRECT ANSWER : Allocates support-department
costs to operating departments by fully recognizing the mutual services provided among all support departments
Question : Variable costs
CORRECT ANSWER : Costs that vary directly with the
level of production.
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Question : Examples of variable expenses
CORRECT ANSWER : Utility bill, groceries, gasoline,
phone bill
Question : Contribution Margin
CORRECT ANSWER : The amount remaining from sales
revenues after all variable expenses have been deducted.Revenue-Variable Expenses
Question : Full-cost pricing
CORRECT ANSWER : Pricing method that uses all
relevant variable costs in setting a product's price and allocates those fixed costs not directly attributed to the production of the priced item.
Question : Breakeven Volume Calculation
CORRECT ANSWER : Break-Even point (units) = Fixed
Costs ÷ (Sales price per unit - Variable costs per unit