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MHA 706 FINAL EXAM QUESTIONS WITH
DETAILED VERIFIED ANSWERS
Indirect Costs Ans: Are costs associated with shared resources used by
the entire organization
Cost Driver Ans: Is the basis on which the cost pool will be allocated
Cost Pool Ans: Is the overhead amount to be allocated
Overhead departments Ans: Are often called costs centers
Patient Service Departments Ans: Are often called revenue centers
Direct Costs Ans: 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 .... Ans: The Allocation Rate
Effective cost drivers should have the following characteristic(s) Ans: -
Perceived as being fair
-Promote Organizational Cost Reduction
Which of the following is NOT a type of allocation method. 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. Ans: 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. Ans: False
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When using the direct cost allocation system - often you are allocating
the cost of xxxx to Patient Service Departments Ans: Support
(overhead) departments
Select all of the following options that are accounting methods to account
for "costs" at an individual service level Ans: 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.
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 the ..... that comprise the
service provided. Ans: 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: Ans: 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... Ans: -Determine the profitability of different service
lines
MHA 706 FINAL EXAM QUESTIONS WITH
DETAILED VERIFIED ANSWERS
Indirect Costs Ans: Are costs associated with shared resources used by
the entire organization
Cost Driver Ans: Is the basis on which the cost pool will be allocated
Cost Pool Ans: Is the overhead amount to be allocated
Overhead departments Ans: Are often called costs centers
Patient Service Departments Ans: Are often called revenue centers
Direct Costs Ans: 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 .... Ans: The Allocation Rate
Effective cost drivers should have the following characteristic(s) Ans: -
Perceived as being fair
-Promote Organizational Cost Reduction
Which of the following is NOT a type of allocation method. 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. Ans: 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. Ans: False
, Page | 2
When using the direct cost allocation system - often you are allocating
the cost of xxxx to Patient Service Departments Ans: Support
(overhead) departments
Select all of the following options that are accounting methods to account
for "costs" at an individual service level Ans: 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.
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 the ..... that comprise the
service provided. Ans: 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: Ans: 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... Ans: -Determine the profitability of different service
lines
