LSUS MHA 706 FINAL LORD ESSENTIAL STUDY
QUESTIONS AND ANSWERS
◉ Cost Allocation Rate
Answer: dividing # of dollars in cash pool/total volume of cost
driver
◉ What makes a good cost driver?
Answer: Perceived as being fair and promote organizational cost
reduction.
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.
◉ Direct cost allocation method
Answer: the costs of each support department are allocated directly
to, and only to, the patient services departments.
◉ Step-down allocation method
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
◉ What is the most used Cost Allocation Method?
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.
◉ Reciprocal allocation method
Answer: allocates support-department costs to operating
departments by fully recognizing the mutual services provided
among all support departments
◉ variable costs
Answer: costs that vary directly with the level of production.
◉ Examples of variable expenses
Answer: utility bill, groceries, gasoline, phone bill
◉ Contribution Margin
Answer: The amount remaining from sales revenues after all
variable expenses have been deducted.
QUESTIONS AND ANSWERS
◉ Cost Allocation Rate
Answer: dividing # of dollars in cash pool/total volume of cost
driver
◉ What makes a good cost driver?
Answer: Perceived as being fair and promote organizational cost
reduction.
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.
◉ Direct cost allocation method
Answer: the costs of each support department are allocated directly
to, and only to, the patient services departments.
◉ Step-down allocation method
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
◉ What is the most used Cost Allocation Method?
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.
◉ Reciprocal allocation method
Answer: allocates support-department costs to operating
departments by fully recognizing the mutual services provided
among all support departments
◉ variable costs
Answer: costs that vary directly with the level of production.
◉ Examples of variable expenses
Answer: utility bill, groceries, gasoline, phone bill
◉ Contribution Margin
Answer: The amount remaining from sales revenues after all
variable expenses have been deducted.
