LSUS MHA 706 FINAL EXAM QUESTIONS AND ANSWERS 2025
Indirect Costs - (ANSWER)Are costs associated with shared resources used by the entire organization
Cost Driver - (ANSWER)Is the basis on which the cost pool will be allocated
Cost Pool - (ANSWER)Is the overhead amount to be allocated
Overhead departments - (ANSWER)Are often called costs centers
Patient Service Departments - (ANSWER)Are often called revenue centers
Direct Costs - (ANSWER)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
.... - (ANSWER)The Allocation Rate
Effective cost drivers should have the following characteristic(s) - (ANSWER)-Perceived as being fair
-Promote Organizational Cost Reduction
Which of the following is NOT a type of allocation method. - (ANSWER)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. -
(ANSWER)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. - (ANSWER)False
When using the direct cost allocation system - often you are allocating the cost of xxxx to Patient Service
Departments - (ANSWER)Support (overhead) departments
, LSUS MHA 706 FINAL EXAM QUESTIONS AND ANSWERS 2025
Select all of the following options that are accounting methods to account for "costs" at an individual
service level - (ANSWER)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. - (ANSWER)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. -
(ANSWER)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: - (ANSWER)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... - (ANSWER)-
Determine the profitability of different service lines
-Identify the lowest feasible price when prices are negotiated
-Set prices on services
When a provider has market dominance, and can set its own prices (within reason), it is said to be a
price setter. In other situations, providers are price takers. Select the responses that may describe a
situation where a provider is a "price-taker." - (ANSWER)-There is payer dominance
Indirect Costs - (ANSWER)Are costs associated with shared resources used by the entire organization
Cost Driver - (ANSWER)Is the basis on which the cost pool will be allocated
Cost Pool - (ANSWER)Is the overhead amount to be allocated
Overhead departments - (ANSWER)Are often called costs centers
Patient Service Departments - (ANSWER)Are often called revenue centers
Direct Costs - (ANSWER)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
.... - (ANSWER)The Allocation Rate
Effective cost drivers should have the following characteristic(s) - (ANSWER)-Perceived as being fair
-Promote Organizational Cost Reduction
Which of the following is NOT a type of allocation method. - (ANSWER)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. -
(ANSWER)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. - (ANSWER)False
When using the direct cost allocation system - often you are allocating the cost of xxxx to Patient Service
Departments - (ANSWER)Support (overhead) departments
, LSUS MHA 706 FINAL EXAM QUESTIONS AND ANSWERS 2025
Select all of the following options that are accounting methods to account for "costs" at an individual
service level - (ANSWER)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. - (ANSWER)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. -
(ANSWER)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: - (ANSWER)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... - (ANSWER)-
Determine the profitability of different service lines
-Identify the lowest feasible price when prices are negotiated
-Set prices on services
When a provider has market dominance, and can set its own prices (within reason), it is said to be a
price setter. In other situations, providers are price takers. Select the responses that may describe a
situation where a provider is a "price-taker." - (ANSWER)-There is payer dominance
