LSUS MHA 706 ACTUAL EXAM QUESTIONS
AND CORRECT ANSWERS
●● 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
AND CORRECT ANSWERS
●● 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
