MHA 706 FINAL EXAM 2023/2024 COMPLETE QUESTIONS
WITH VERIFIED ANSWERS/ALREADY PASSED+
Direct Costs
Costs unique and exclusive to a department. GENERATE REVENUE
Ex- costs associated with providing the clinical testing such as staff and
supplies.
Indirect costs (overheads)
Costs associated with shared resources used by the entire organization
Ex-costs associated with central services such as human resources and
finance
Cost Allocation
Assign all overhead costs to the departments that create the need for such
costs, typically the patient services departments.
Cost Pool
Overhead amount to be allocated.
Consists of the direct costs of one overhead department.
Ex- HR Cost.
cost driver
Basis on which the cost pool will be allocated.
Ex- the cost driver for facilities overhead (building space depreciation,
maintenance, utilities, and so on) might be the amount of space used by
each department that uses the organization's facilities.
Cost Allocation Rate
dividing # of dollars in cash pool/total volume of cost driver
What makes a good cost driver?
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
the costs of each support department are allocated directly to, and only to,
the patient services departments.
,Step-down allocation method
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?
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
allocates support-department costs to operating departments by fully
recognizing the mutual services provided among all support departments
variable costs
costs that vary directly with the level of production.
Examples of variable expenses
utility bill, groceries, gasoline, phone bill
Contribution Margin
The amount remaining from sales revenues after all variable expenses
have been deducted.
Revenue-Variable Expenses
Full-cost pricing
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.
Breakeven Volume Calculation
Break-Even point (units) = Fixed Costs ÷ (Sales price per unit - Variable
costs per unit
Basic sources of capital
Working Capital, Equity Capital, Debt Capital
Factors that impact interest rates
-Time to maturity
-Default risk of debt issuer
-Inflation rate
-Liquidity of debt
-Protective provisions of security issuer
Debt Contracts
are agreements by the borrowers to pay the lenders fixed dollar amounts at
periodic intervals.
Also called (Bond indenture, Loan agreement, Promissory note)
, bond interest rate
-Both the interest rate an issuer pays its bondholders and the timing of
payments are set when a bond is issued
-Interest on a bond accrues daily and is paid in semiannual installments
over the life of the bond
Cost of Debt Capital
The required rate of return on investment of the lenders of a company.
callable bonds
bonds that the issuing company can redeem (buy back) at a stated dollar
amount prior to maturity
Non-Callable Bond
a financial security that cannot be redeemed early by the issuer except with
the payment of a penalty.
-The issuer of a noncallable bond subjects itself to interest rate risk
because, at issuance, it locks in the interest rate it will pay until the security
matures
Present Value of a Bond
calculated by discounting the interest payments (coupons) and face value
at the current market rate
The yield to maturity on a bond is
the discount rate that will set the present value of the payments equal to
the bond price
Factors that determine price of a bond
At maturity, a bond's value must equal its par value (plus final interest
payment)
The value of a premium bond will decrease to par value at maturity
The value of a discount bond will increase to par value at maturity
A par bond value will remain at par if interest rates remain constant
The return in each year consists of an interest payment (yield) and a price
change (capital gains yield)
Constant growth dividend model
a widely cited dividend valuation approach that assumes dividends will
grow at a constant rate, but a rate less than the required return
Assumptions of constant growth dividend model
E(g1) = E(g2) = E(gN) = E(g)
R(Re) E(g)
The last dividend was paid recently
Dividends are paid annually.
Efficient Market Theory
WITH VERIFIED ANSWERS/ALREADY PASSED+
Direct Costs
Costs unique and exclusive to a department. GENERATE REVENUE
Ex- costs associated with providing the clinical testing such as staff and
supplies.
Indirect costs (overheads)
Costs associated with shared resources used by the entire organization
Ex-costs associated with central services such as human resources and
finance
Cost Allocation
Assign all overhead costs to the departments that create the need for such
costs, typically the patient services departments.
Cost Pool
Overhead amount to be allocated.
Consists of the direct costs of one overhead department.
Ex- HR Cost.
cost driver
Basis on which the cost pool will be allocated.
Ex- the cost driver for facilities overhead (building space depreciation,
maintenance, utilities, and so on) might be the amount of space used by
each department that uses the organization's facilities.
Cost Allocation Rate
dividing # of dollars in cash pool/total volume of cost driver
What makes a good cost driver?
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
the costs of each support department are allocated directly to, and only to,
the patient services departments.
,Step-down allocation method
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?
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
allocates support-department costs to operating departments by fully
recognizing the mutual services provided among all support departments
variable costs
costs that vary directly with the level of production.
Examples of variable expenses
utility bill, groceries, gasoline, phone bill
Contribution Margin
The amount remaining from sales revenues after all variable expenses
have been deducted.
Revenue-Variable Expenses
Full-cost pricing
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.
Breakeven Volume Calculation
Break-Even point (units) = Fixed Costs ÷ (Sales price per unit - Variable
costs per unit
Basic sources of capital
Working Capital, Equity Capital, Debt Capital
Factors that impact interest rates
-Time to maturity
-Default risk of debt issuer
-Inflation rate
-Liquidity of debt
-Protective provisions of security issuer
Debt Contracts
are agreements by the borrowers to pay the lenders fixed dollar amounts at
periodic intervals.
Also called (Bond indenture, Loan agreement, Promissory note)
, bond interest rate
-Both the interest rate an issuer pays its bondholders and the timing of
payments are set when a bond is issued
-Interest on a bond accrues daily and is paid in semiannual installments
over the life of the bond
Cost of Debt Capital
The required rate of return on investment of the lenders of a company.
callable bonds
bonds that the issuing company can redeem (buy back) at a stated dollar
amount prior to maturity
Non-Callable Bond
a financial security that cannot be redeemed early by the issuer except with
the payment of a penalty.
-The issuer of a noncallable bond subjects itself to interest rate risk
because, at issuance, it locks in the interest rate it will pay until the security
matures
Present Value of a Bond
calculated by discounting the interest payments (coupons) and face value
at the current market rate
The yield to maturity on a bond is
the discount rate that will set the present value of the payments equal to
the bond price
Factors that determine price of a bond
At maturity, a bond's value must equal its par value (plus final interest
payment)
The value of a premium bond will decrease to par value at maturity
The value of a discount bond will increase to par value at maturity
A par bond value will remain at par if interest rates remain constant
The return in each year consists of an interest payment (yield) and a price
change (capital gains yield)
Constant growth dividend model
a widely cited dividend valuation approach that assumes dividends will
grow at a constant rate, but a rate less than the required return
Assumptions of constant growth dividend model
E(g1) = E(g2) = E(gN) = E(g)
R(Re) E(g)
The last dividend was paid recently
Dividends are paid annually.
Efficient Market Theory
