MHA 706 Final Exam Questions & Answers
2023/2024
Indirect Costs - CORRECT ANSWER-Are costs associated with shared
resources used by the entire organization
Cost Driver - CORRECT ANSWER-Is the basis on which the cost pool will be
allocated
Cost Pool - CORRECT ANSWER-Is the overhead amount to be allocated
Overhead departments - CORRECT ANSWER-Are often called costs centers
Patient Service Departments - CORRECT ANSWER-Are often called revenue
centers
Direct Costs - CORRECT ANSWER-Are 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 .... - CORRECT ANSWER-The Allocation Rate
Effective cost drivers should have the following characteristic(s) - CORRECT
ANSWER--Perceived as being fair
-Promote Organizational Cost Reduction
Which of the following is NOT a type of allocation method. - CORRECT
ANSWER-step-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. - CORRECT ANSWER-Square 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. - CORRECT ANSWER-False
When using the direct cost allocation system - often you are allocating the cost of
xxxx to Patient Service Departments - CORRECT ANSWER-Support (overhead)
departments
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)
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 whole
Charges reflect the level of intensity of the service provided
Activity based costing (ABC) begins with the ..... that comprise the service
provided. - CORRECT ANSWER-Individual 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: - CORRECT
ANSWER-Collect- 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... - CORRECT 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." - CORRECT 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 -
CORRECT ANSWER-incremental
Target costing is used by - CORRECT ANSWER-price takers
Scenario analysis - CORRECT ANSWER-is a technique in which alternative
scenarios are analyzed
Capitation rates are quoted - CORRECT ANSWER-per member per month basis
To break-even, revenues - CORRECT ANSWER-must equal total costs
The interest rate is described as the ..... on a debt security. - CORRECT
ANSWER-cost of capital
Select all the "corporate" bond types - CORRECT ANSWER-mortgage bonds,
debenture bonds, subordinated debenture bonds
Bond contracts typically contain the following.... - CORRECT ANSWER-Maturity
agreements, Interest rate and type, Restrictive covenant, Trustee designation
The financial value of an asset stems... - CORRECT ANSWER-from the asset's
expected cash flows
Interest Rate - CORRECT ANSWER-is the bond's required rate of return
call provision - CORRECT ANSWER-permits the borrower to redeem the debt
prior to maturity
, Debt Ratings - CORRECT ANSWER-reflect the probability of default
Long-term bonds have high price risk but - CORRECT ANSWER-low
reinvestment rate risk
Nothing - CORRECT ANSWER-is risk-less! Remember that any investment has
risk
Short-term bonds have low price risk but - CORRECT ANSWER-high
reinvestment rate risk
Debt service requirements - CORRECT ANSWER-Reflects mandatory
requirements of the debt issue, concerning issues, such as, total debt service
payments, interest expense, and repayment of principle
New versus seasoned bonds - CORRECT ANSWER-When market conditions
change, the value of outstanding bonds change
Maturity Date - CORRECT ANSWER-Date when the par value will be repaid to
investors
Par Value - CORRECT ANSWER-Stated face value of the bond
Coupon Rate - CORRECT ANSWER-Stated interest rated on the bond
At maturity, a bond's value must equal its par value (plus final interest payments).
- CORRECT ANSWER-true
A par bond value - CORRECT ANSWER-will remain at par if interest rates
remain constant
The value of a premium bond - CORRECT ANSWER-will decrease to par value
at maturity
the return in each year consists of - CORRECT ANSWER-the yield and capital
gains yield
2023/2024
Indirect Costs - CORRECT ANSWER-Are costs associated with shared
resources used by the entire organization
Cost Driver - CORRECT ANSWER-Is the basis on which the cost pool will be
allocated
Cost Pool - CORRECT ANSWER-Is the overhead amount to be allocated
Overhead departments - CORRECT ANSWER-Are often called costs centers
Patient Service Departments - CORRECT ANSWER-Are often called revenue
centers
Direct Costs - CORRECT ANSWER-Are 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 .... - CORRECT ANSWER-The Allocation Rate
Effective cost drivers should have the following characteristic(s) - CORRECT
ANSWER--Perceived as being fair
-Promote Organizational Cost Reduction
Which of the following is NOT a type of allocation method. - CORRECT
ANSWER-step-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. - CORRECT ANSWER-Square 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. - CORRECT ANSWER-False
When using the direct cost allocation system - often you are allocating the cost of
xxxx to Patient Service Departments - CORRECT ANSWER-Support (overhead)
departments
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)
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 whole
Charges reflect the level of intensity of the service provided
Activity based costing (ABC) begins with the ..... that comprise the service
provided. - CORRECT ANSWER-Individual 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: - CORRECT
ANSWER-Collect- 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... - CORRECT 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." - CORRECT 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 -
CORRECT ANSWER-incremental
Target costing is used by - CORRECT ANSWER-price takers
Scenario analysis - CORRECT ANSWER-is a technique in which alternative
scenarios are analyzed
Capitation rates are quoted - CORRECT ANSWER-per member per month basis
To break-even, revenues - CORRECT ANSWER-must equal total costs
The interest rate is described as the ..... on a debt security. - CORRECT
ANSWER-cost of capital
Select all the "corporate" bond types - CORRECT ANSWER-mortgage bonds,
debenture bonds, subordinated debenture bonds
Bond contracts typically contain the following.... - CORRECT ANSWER-Maturity
agreements, Interest rate and type, Restrictive covenant, Trustee designation
The financial value of an asset stems... - CORRECT ANSWER-from the asset's
expected cash flows
Interest Rate - CORRECT ANSWER-is the bond's required rate of return
call provision - CORRECT ANSWER-permits the borrower to redeem the debt
prior to maturity
, Debt Ratings - CORRECT ANSWER-reflect the probability of default
Long-term bonds have high price risk but - CORRECT ANSWER-low
reinvestment rate risk
Nothing - CORRECT ANSWER-is risk-less! Remember that any investment has
risk
Short-term bonds have low price risk but - CORRECT ANSWER-high
reinvestment rate risk
Debt service requirements - CORRECT ANSWER-Reflects mandatory
requirements of the debt issue, concerning issues, such as, total debt service
payments, interest expense, and repayment of principle
New versus seasoned bonds - CORRECT ANSWER-When market conditions
change, the value of outstanding bonds change
Maturity Date - CORRECT ANSWER-Date when the par value will be repaid to
investors
Par Value - CORRECT ANSWER-Stated face value of the bond
Coupon Rate - CORRECT ANSWER-Stated interest rated on the bond
At maturity, a bond's value must equal its par value (plus final interest payments).
- CORRECT ANSWER-true
A par bond value - CORRECT ANSWER-will remain at par if interest rates
remain constant
The value of a premium bond - CORRECT ANSWER-will decrease to par value
at maturity
the return in each year consists of - CORRECT ANSWER-the yield and capital
gains yield
