LSUS MHA 706 EXAM / LATEST LSUS MHA 706 ACTUAL
FINAL EXAM 2026/2027 PRACTICE QUESTIONS AND
STUDY GUIDE ACCURATE EXAM COMPLETE APPROVED
QUESTIONS WITH WELL ELABORATED ANSWERS AND
DETAILED RATIONALES (RELIABLE ANSWERS)
CURRENTLY UPDATED VERSION 2026 EDITION
|GUARANTEED SUCCESS A+ |INSTANT DOWNLOAD
PDF |JUST RELEASED
1. When using the direct cost allocation system, costs are allocated
from __________ to Patient Service Departments.
A. Revenue-producing departments
B. Support (overhead) Departments
C. Government agencies
D. External vendors
Correct Answer: B. Support (overhead) Departments
Rationale: The direct method allocates costs of support departments
(like HR or Housekeeping) directly to patient service departments
(like Surgery or Radiology) that generate revenue. This approach
ignores any services provided between support departments.
,2. "Dollars in the Cost Pool" divided by "Total Volume of Cost
Driver" equals the:
A. Total cost of the service
B. Cost-to-charge ratio
C. Allocation Rate
D. Marginal cost
Correct Answer: C. Allocation Rate
Rationale: The allocation rate is calculated by dividing the total
overhead cost in a cost pool by the total volume of the cost driver.
This rate is then applied to each department based on its usage of the
cost driver to allocate overhead costs.
3. Which of the following is NOT a recognized method of cost
allocation?
A. Direct Method
B. Step-Down Method
C. Reciprocal Method
D. Step-Up Method
,Correct Answer: D. Step-Up Method
Rationale: The three primary allocation methods are direct, step-
down, and reciprocal. The Step-Down Method is a recognized
approach; "Step-Up Method" is a distractor term and not a valid
allocation methodology.
4. An Accounting Manager allocating facilities costs to other
departments should use which appropriate cost driver?
A. Number of employees
B. Total patient days
C. Square footage of the department
D. Supply costs
Correct Answer: C. Square footage of the department
Rationale: Facilities costs (e.g., rent, utilities, maintenance) are
typically driven by the amount of space a department occupies.
Therefore, square footage is the most appropriate and fair cost driver
for allocating these costs.
5. Effective cost drivers should possess which characteristics?
, A. Promote organizational cost reduction
B. Perceived as being fair by departments
C. Both A and B
D. Minimize overall organizational expenses
Correct Answer: C. Both A and B
Rationale: A good cost driver should be fair, meaning departments
understand and accept the basis for allocation. It should also
incentivize cost reduction by encouraging managers to be more
efficient in using the resources represented by the cost driver.
6. True or False: Once a company uses the Direct Method to allocate
costs to revenue-producing departments, the total level of expenses
decreases for the organization.
A. True
B. False
Correct Answer: B. False
FINAL EXAM 2026/2027 PRACTICE QUESTIONS AND
STUDY GUIDE ACCURATE EXAM COMPLETE APPROVED
QUESTIONS WITH WELL ELABORATED ANSWERS AND
DETAILED RATIONALES (RELIABLE ANSWERS)
CURRENTLY UPDATED VERSION 2026 EDITION
|GUARANTEED SUCCESS A+ |INSTANT DOWNLOAD
PDF |JUST RELEASED
1. When using the direct cost allocation system, costs are allocated
from __________ to Patient Service Departments.
A. Revenue-producing departments
B. Support (overhead) Departments
C. Government agencies
D. External vendors
Correct Answer: B. Support (overhead) Departments
Rationale: The direct method allocates costs of support departments
(like HR or Housekeeping) directly to patient service departments
(like Surgery or Radiology) that generate revenue. This approach
ignores any services provided between support departments.
,2. "Dollars in the Cost Pool" divided by "Total Volume of Cost
Driver" equals the:
A. Total cost of the service
B. Cost-to-charge ratio
C. Allocation Rate
D. Marginal cost
Correct Answer: C. Allocation Rate
Rationale: The allocation rate is calculated by dividing the total
overhead cost in a cost pool by the total volume of the cost driver.
This rate is then applied to each department based on its usage of the
cost driver to allocate overhead costs.
3. Which of the following is NOT a recognized method of cost
allocation?
A. Direct Method
B. Step-Down Method
C. Reciprocal Method
D. Step-Up Method
,Correct Answer: D. Step-Up Method
Rationale: The three primary allocation methods are direct, step-
down, and reciprocal. The Step-Down Method is a recognized
approach; "Step-Up Method" is a distractor term and not a valid
allocation methodology.
4. An Accounting Manager allocating facilities costs to other
departments should use which appropriate cost driver?
A. Number of employees
B. Total patient days
C. Square footage of the department
D. Supply costs
Correct Answer: C. Square footage of the department
Rationale: Facilities costs (e.g., rent, utilities, maintenance) are
typically driven by the amount of space a department occupies.
Therefore, square footage is the most appropriate and fair cost driver
for allocating these costs.
5. Effective cost drivers should possess which characteristics?
, A. Promote organizational cost reduction
B. Perceived as being fair by departments
C. Both A and B
D. Minimize overall organizational expenses
Correct Answer: C. Both A and B
Rationale: A good cost driver should be fair, meaning departments
understand and accept the basis for allocation. It should also
incentivize cost reduction by encouraging managers to be more
efficient in using the resources represented by the cost driver.
6. True or False: Once a company uses the Direct Method to allocate
costs to revenue-producing departments, the total level of expenses
decreases for the organization.
A. True
B. False
Correct Answer: B. False
