MHA 706 Final Exam Questions with Complete Solutions Graded A+

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 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 -It is a perfectly competitive market -The provider is dealing with a government payer/program Under marginal cost pricing, prices for a service are set to cover .... costs - Answer: incremental Target costing is used by - Answer: price takers