LSUS MHA 706 FINAL – LORD: Questions/Solutions
Cost Driver is the... Correct Ans - basis cost pool will be allocated
Cost Pool is the... Correct Ans - overhead amount to be allocated
Overhead Departments are... Correct Ans - often called cost centers
Indirect Costs Correct Ans - Costs of shared resources used by the
entire organization
Patient Service Departments are... Correct Ans - often called
revenue centers
Direct Costs are... Correct Ans - costs unique and exclusive to a
department
"Dollars in the Cost Pool" / "Total Volume of Cost Driver" = Correct Ans
- Allocation Rate
Effective cost drivers should have what characteristics(s)? Correct Ans
- -Promote organizational cost reduction
-Perceived as being fair
__________ is NOT a type of allocation method? Correct Ans - 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 Ans - -Square footage of
the department
-Housekeeping
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. Correct Ans - False
, When using the direct cost allocation system - often you are allocating the
cost of __________ to Patient Service Departments. Correct Ans -
Support (overhead) Departments
__________ are accounting methods to account for "cost" at an individual
service level. Correct Ans - Time Driven-Costing (TDBC)
Activity Based Costing (ABC)
Cost-to-Charge Ratio (CCR)
Relative Value (RVU)
__________ are true assumption(s) of the Cost-to-Charge Ratio Method.
Correct Ans - 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 _________ that comprise the service
provided. Correct Ans - Individual Activities
Calculate... Correct Ans - total costs of the service by aggregating
activity costs
Estimate... Correct Ans - cost of each activity
Collect... Correct Ans - activity data for each service
Identify... Correct Ans - the relevant activities
Assign... Correct Ans - cost drivers for each activity
One use of managerial accounting information within a health service
organization is to.... Correct Ans - -Set prices on services
-Identify the lowest feasible price when prices are negotiated
-Determine the profitability of different service lines
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. __________ may describe a situation where a provider is a "price
taker." Correct Ans - There is a payer dominance
Cost Driver is the... Correct Ans - basis cost pool will be allocated
Cost Pool is the... Correct Ans - overhead amount to be allocated
Overhead Departments are... Correct Ans - often called cost centers
Indirect Costs Correct Ans - Costs of shared resources used by the
entire organization
Patient Service Departments are... Correct Ans - often called
revenue centers
Direct Costs are... Correct Ans - costs unique and exclusive to a
department
"Dollars in the Cost Pool" / "Total Volume of Cost Driver" = Correct Ans
- Allocation Rate
Effective cost drivers should have what characteristics(s)? Correct Ans
- -Promote organizational cost reduction
-Perceived as being fair
__________ is NOT a type of allocation method? Correct Ans - 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 Ans - -Square footage of
the department
-Housekeeping
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. Correct Ans - False
, When using the direct cost allocation system - often you are allocating the
cost of __________ to Patient Service Departments. Correct Ans -
Support (overhead) Departments
__________ are accounting methods to account for "cost" at an individual
service level. Correct Ans - Time Driven-Costing (TDBC)
Activity Based Costing (ABC)
Cost-to-Charge Ratio (CCR)
Relative Value (RVU)
__________ are true assumption(s) of the Cost-to-Charge Ratio Method.
Correct Ans - 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 _________ that comprise the service
provided. Correct Ans - Individual Activities
Calculate... Correct Ans - total costs of the service by aggregating
activity costs
Estimate... Correct Ans - cost of each activity
Collect... Correct Ans - activity data for each service
Identify... Correct Ans - the relevant activities
Assign... Correct Ans - cost drivers for each activity
One use of managerial accounting information within a health service
organization is to.... Correct Ans - -Set prices on services
-Identify the lowest feasible price when prices are negotiated
-Determine the profitability of different service lines
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. __________ may describe a situation where a provider is a "price
taker." Correct Ans - There is a payer dominance
