MHA 706 EXAM 2026 MASTERCLASS
REVIEW SET INCLUDING FULL QUESTION
ANALYSIS AND STEP-BY-STEP
SOLUTIONS
Ex- costs associated with providing the clinical testing such as staff
and supplies.
◉ Indirect costs (overheads). Answer: Costs associated with shared
resources used by the entire organization
Ex-costs associated with central services such as human resources and
finance
◉ Cost Allocation. Answer: Assign all overhead costs to the
departments that create the need for such costs, typically the patient
services departments.
◉ Cost Pool. Answer: Overhead amount to be allocated.
Consists of the direct costs of one overhead department.
Ex- HR Cost.
, ◉ cost driver. Answer: 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. 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
REVIEW SET INCLUDING FULL QUESTION
ANALYSIS AND STEP-BY-STEP
SOLUTIONS
Ex- costs associated with providing the clinical testing such as staff
and supplies.
◉ Indirect costs (overheads). Answer: Costs associated with shared
resources used by the entire organization
Ex-costs associated with central services such as human resources and
finance
◉ Cost Allocation. Answer: Assign all overhead costs to the
departments that create the need for such costs, typically the patient
services departments.
◉ Cost Pool. Answer: Overhead amount to be allocated.
Consists of the direct costs of one overhead department.
Ex- HR Cost.
, ◉ cost driver. Answer: 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. 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
