HSMA 4055 QUIZ 3 REVIEW QUESTIONS AND ANSWERS
Which of the following statements about managerial accounting is incorrect? - CORRECT
ANSWER✅✅Managerial accounting information is prepared in accordance with rules established by
outsiders (generally accepted accounting principles)
Which of the below statements about cost allocation is most correct? - CORRECT ANSWER✅✅The
reciprocal method is conceptually the best but typically he most expensive to implement
Which of the following statements about cost allocation is most correct? - CORRECT ANSWER✅✅none
of the above statements are correct
Effective cost drivers should have which of the following characteristics? - CORRECT ANSWER✅✅they
should be perceived as being fair
they should create an incentive for cost reduction
(both a and b)
Which of the following statements about activity-based costing (ABC) is most correct? - CORRECT
ANSWER✅✅it is most useful for assigning costs to individual services
Which of the following statements about relevant range is most correct? - CORRECT ANSWER✅✅it is
the range of output (volume) for which the organization's cost structure holds
true or false: in general, the best way to allocate costs in a large organization is to assign all overhead
expenses to a single cost pool with one cost driver - CORRECT ANSWER✅✅false
true or false: the relationship between costs and the volume of services provided is called underlying
cost structure - CORRECT ANSWER✅✅true
True or false: the goal (purpose) of cost allocation is to assign all overhead costs to the activities
(departments) that cause the costs to be incurred - CORRECT ANSWER✅✅true
, true or false: in economics, the situation in which average cost (per unit of output) declines as volume
increases is known as economies of scope - CORRECT ANSWER✅✅false
Which of the following pricing strategies is most likely to lead to long term financial sustainability? -
CORRECT ANSWER✅✅full cost
Which of the following pricing strategies is most likely to ensure profitability on a contract undertake by
a price-taker provider? - CORRECT ANSWER✅✅target costing
Which of the following statements best describes the contribution margin? - CORRECT ANSWER✅✅the
contribution margin is the dollar amount of each unit of output that is available first to cover fixed costs
and then to contribute to profit
Which of following statements regarding the relationship between reimbursement method and risk
is/are most correct? - CORRECT ANSWER✅✅Under capitation, risk is reduced by maximizing the
percentage of fixed costs
under fee for service, risk is reduced by maximizing the percentage of variable costs
(answers a and d are correct)
When a provider has market dominance and hence can set its own (within reason), it is called a price
taker - CORRECT ANSWER✅✅false
Under full-cost pricing, prices are set to cover all costs, including economic costs (profits). - CORRECT
ANSWER✅✅true
Under capitation, the contribution margin is negative when volume is measured by units of output (per
visit, per procedure, per patient day, and so on) - CORRECT ANSWER✅✅true
Which of the following statements about managerial accounting is incorrect? - CORRECT
ANSWER✅✅Managerial accounting information is prepared in accordance with rules established by
outsiders (generally accepted accounting principles)
Which of the below statements about cost allocation is most correct? - CORRECT ANSWER✅✅The
reciprocal method is conceptually the best but typically he most expensive to implement
Which of the following statements about cost allocation is most correct? - CORRECT ANSWER✅✅none
of the above statements are correct
Effective cost drivers should have which of the following characteristics? - CORRECT ANSWER✅✅they
should be perceived as being fair
they should create an incentive for cost reduction
(both a and b)
Which of the following statements about activity-based costing (ABC) is most correct? - CORRECT
ANSWER✅✅it is most useful for assigning costs to individual services
Which of the following statements about relevant range is most correct? - CORRECT ANSWER✅✅it is
the range of output (volume) for which the organization's cost structure holds
true or false: in general, the best way to allocate costs in a large organization is to assign all overhead
expenses to a single cost pool with one cost driver - CORRECT ANSWER✅✅false
true or false: the relationship between costs and the volume of services provided is called underlying
cost structure - CORRECT ANSWER✅✅true
True or false: the goal (purpose) of cost allocation is to assign all overhead costs to the activities
(departments) that cause the costs to be incurred - CORRECT ANSWER✅✅true
, true or false: in economics, the situation in which average cost (per unit of output) declines as volume
increases is known as economies of scope - CORRECT ANSWER✅✅false
Which of the following pricing strategies is most likely to lead to long term financial sustainability? -
CORRECT ANSWER✅✅full cost
Which of the following pricing strategies is most likely to ensure profitability on a contract undertake by
a price-taker provider? - CORRECT ANSWER✅✅target costing
Which of the following statements best describes the contribution margin? - CORRECT ANSWER✅✅the
contribution margin is the dollar amount of each unit of output that is available first to cover fixed costs
and then to contribute to profit
Which of following statements regarding the relationship between reimbursement method and risk
is/are most correct? - CORRECT ANSWER✅✅Under capitation, risk is reduced by maximizing the
percentage of fixed costs
under fee for service, risk is reduced by maximizing the percentage of variable costs
(answers a and d are correct)
When a provider has market dominance and hence can set its own (within reason), it is called a price
taker - CORRECT ANSWER✅✅false
Under full-cost pricing, prices are set to cover all costs, including economic costs (profits). - CORRECT
ANSWER✅✅true
Under capitation, the contribution margin is negative when volume is measured by units of output (per
visit, per procedure, per patient day, and so on) - CORRECT ANSWER✅✅true
