MHA 706 FINAL EXAM QUESTIONS
WITH COMPLETE ANSWERS
[GRADED A+]
Indirect Costs - ✔✔Are costs associated with shared resources used by
the entire organization
Cost Driver - ✔✔Is the basis on which the cost pool will be allocated
Cost Pool - ✔✔Is the overhead amount to be allocated
Overhead departments - ✔✔Are often called costs centers
Patient Service Departments - ✔✔Are often called revenue centers
Direct Costs - ✔✔Are costs unique and exclusive to a department
©morren 2025/2026. Year published 2025.
,When you divide the "Dollars in the Cost Pool" by "Total Volume of Cost
Driver" - you have determined .... - ✔✔The Allocation Rate
Effective cost drivers should have the following characteristic(s) - ✔✔-
Perceived as being fair
-Promote Organizational Cost Reduction
Which of the following is NOT a type of allocation method. - ✔✔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. - ✔✔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. - ✔✔False
©morren 2025/2026. Year published 2025.
, When using the direct cost allocation system - often you are allocating the
cost of xxxx to Patient Service Departments - ✔✔Support (overhead)
departments
Select all of the following options that are accounting methods to account
for "costs" at an individual service level - ✔✔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. -
✔✔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. - ✔✔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
©morren 2025/2026. Year published 2025.
WITH COMPLETE ANSWERS
[GRADED A+]
Indirect Costs - ✔✔Are costs associated with shared resources used by
the entire organization
Cost Driver - ✔✔Is the basis on which the cost pool will be allocated
Cost Pool - ✔✔Is the overhead amount to be allocated
Overhead departments - ✔✔Are often called costs centers
Patient Service Departments - ✔✔Are often called revenue centers
Direct Costs - ✔✔Are costs unique and exclusive to a department
©morren 2025/2026. Year published 2025.
,When you divide the "Dollars in the Cost Pool" by "Total Volume of Cost
Driver" - you have determined .... - ✔✔The Allocation Rate
Effective cost drivers should have the following characteristic(s) - ✔✔-
Perceived as being fair
-Promote Organizational Cost Reduction
Which of the following is NOT a type of allocation method. - ✔✔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. - ✔✔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. - ✔✔False
©morren 2025/2026. Year published 2025.
, When using the direct cost allocation system - often you are allocating the
cost of xxxx to Patient Service Departments - ✔✔Support (overhead)
departments
Select all of the following options that are accounting methods to account
for "costs" at an individual service level - ✔✔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. -
✔✔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. - ✔✔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
©morren 2025/2026. Year published 2025.
