MHA 706 FINAL EXAM QUESTIONS AND
ANSWERS FULLY SOLVED
Question : Indirect Costs
CORRECT ANSWER: Are costs associated with shared
resources used by the entire organization
Question : Cost Driver
CORRECT ANSWER: Is the basis on which the cost pool
will be allocated
Question : Cost Pool
CORRECT ANSWER: Is the overhead amount to be
allocated
Question : Overhead departments
CORRECT ANSWER: Are often called costs centers
Question : Patient Service Departments
CORRECT ANSWER: Are often called revenue centers
Question : Direct Costs
CORRECT ANSWER: Are costs unique and exclusive to a
department
Question : When you divide the "Dollars in the Cost Pool" by
"Total Volume of Cost Driver" - you have determined ....
CORRECT ANSWER: The Allocation Rate
Question : Effective cost drivers should have the following
characteristic(s)
CORRECT ANSWER: -Perceived as being fair-Promote
Organizational Cost Reduction
Question : Which of the following is NOT a type of
allocation method.
CORRECT ANSWE R: step-up method
Question : 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.
CORRECT ANSWER: Square footage of the department
Question : 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.
CORRECT ANSWER: False
Question : When using the direct cost allocation system -
often you are allocating the cost of xxxx to Patient Service Departments
CORRECT ANSWER: Support (overhead) departments
Question : Select all of the following options that are
accounting methods to account for "costs" at an individual service level
CORRECT ANSWER: Activity Based Costing
(ABC)Relative Value Unit (RVU)Time-Driven Activity Based Costing (TDABC) Cost-to-Charge Ratio (CCR)
Question : Select all of the true assumption(s) of the Cost-to-
Charge Ratio Method.
CORRECT ANSWER: Each service consumes overhead
costs in the same proportion as the department as a wholeCharges reflect the level of intensity of the service provided
Question : Activity based costing (ABC) begins with the .....
that comprise the service provided.
CORRECT ANSWER: Individual Activities
Question : 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:
CORRECT ANSWER: Collect- activity data for each
serviceIdentify- the relevant activitiesEstimate- the cost of each activityAssign- cost drivers for each activitiesCalculate- the total costs of the service by aggregating activity costs
Question : One use of managerial accounting information
within a health service organization is to...
CORRECT ANSWER: -Determine the profitability of
different service lines-Identify the lowest feasible price when prices are negotiated-Set prices on services
Question : 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."
CORRECT ANSWER: -There is payer dominance-It is a
perfectly competitive market-The provider is dealing with a government payer/program
Question : Under marginal cost pricing, prices for a service
are set to cover .... costs