HCAD 760 EXAM 2 QUESTIONS AND ANSWERS WIT
COMPLETE SOLUTIONS VERIFIED
cost allocation - (ANSWER)assign all overhead costs to the departments that create the need for
such costs, typically the patient services department
cost pool - (ANSWER)Overhead amount to be allocated.
Consists of the direct costs of one overhead department
cost driver - (ANSWER)The basis on which a cost pool is allocated; for example, square footage
for facilities costs.
Direct Method - (ANSWER)Cost allocation method in which the costs of each support
department are allocated directly to, and only to, the patient services department
Step-down method - (ANSWER)a cost allocation method that recognizes some of the overhead
services provided by one support department to another
Reciprocal Method - (ANSWER)A method that simultaneously allocates service costs to all user
departments. It gives full consideration to interactions among support departments.
Charge-to-cost ratio (CCR) - (ANSWER)ties overhead resource consumption to charges (or
revenues)
Relative Value Unit (RVU) - (ANSWER)ties the use of overhead resources to the complexity and
time required for each service as measured by RVUs
Activity-based costing (ABC) - (ANSWER)A method of cost accounting designed to identify
streams of activity and then to allocate costs differently in different service lines
price setter - (ANSWER)provider has market dominance and can set it's own prices
, price takers - (ANSWER)perfectly competitive markets, payer dominance, government programs
Full-cost pricing - (ANSWER)Prices are set to cover all costs associated with providing a
particular service (direct and indirect costs), typically adds a profit component
marginal cost pricing - (ANSWER)prices for a service are set to cover incremental, or marginal,
costs (generally recovering only direct variable costs)
target costing - (ANSWER)revenues are projected assuming prices as given in the marketplace,
required profits are subtracted from revenues, remainder is target cost level
term loan - (ANSWER)a bank loan that lasts for a specific term
term loan examples - (ANSWER)student loans, mortgage
Treasury Bonds - (ANSWER)Bonds issued by the federal government, sometimes referred to as
government bonds.
Corporate Bonds - (ANSWER)bonds issued by for-profit corporations
mortgage bond - (ANSWER)a bond secured by a lien on real property
debenture bonds - (ANSWER)Bonds that are unsecured (i.e., not backed by any collateral such
as equipment).
municipal bonds - (ANSWER)tax-exempt bonds issued by state and local governments
Current Ratio - (ANSWER)measures liquidity and determines whether an organization can pay
back its debt
COMPLETE SOLUTIONS VERIFIED
cost allocation - (ANSWER)assign all overhead costs to the departments that create the need for
such costs, typically the patient services department
cost pool - (ANSWER)Overhead amount to be allocated.
Consists of the direct costs of one overhead department
cost driver - (ANSWER)The basis on which a cost pool is allocated; for example, square footage
for facilities costs.
Direct Method - (ANSWER)Cost allocation method in which the costs of each support
department are allocated directly to, and only to, the patient services department
Step-down method - (ANSWER)a cost allocation method that recognizes some of the overhead
services provided by one support department to another
Reciprocal Method - (ANSWER)A method that simultaneously allocates service costs to all user
departments. It gives full consideration to interactions among support departments.
Charge-to-cost ratio (CCR) - (ANSWER)ties overhead resource consumption to charges (or
revenues)
Relative Value Unit (RVU) - (ANSWER)ties the use of overhead resources to the complexity and
time required for each service as measured by RVUs
Activity-based costing (ABC) - (ANSWER)A method of cost accounting designed to identify
streams of activity and then to allocate costs differently in different service lines
price setter - (ANSWER)provider has market dominance and can set it's own prices
, price takers - (ANSWER)perfectly competitive markets, payer dominance, government programs
Full-cost pricing - (ANSWER)Prices are set to cover all costs associated with providing a
particular service (direct and indirect costs), typically adds a profit component
marginal cost pricing - (ANSWER)prices for a service are set to cover incremental, or marginal,
costs (generally recovering only direct variable costs)
target costing - (ANSWER)revenues are projected assuming prices as given in the marketplace,
required profits are subtracted from revenues, remainder is target cost level
term loan - (ANSWER)a bank loan that lasts for a specific term
term loan examples - (ANSWER)student loans, mortgage
Treasury Bonds - (ANSWER)Bonds issued by the federal government, sometimes referred to as
government bonds.
Corporate Bonds - (ANSWER)bonds issued by for-profit corporations
mortgage bond - (ANSWER)a bond secured by a lien on real property
debenture bonds - (ANSWER)Bonds that are unsecured (i.e., not backed by any collateral such
as equipment).
municipal bonds - (ANSWER)tax-exempt bonds issued by state and local governments
Current Ratio - (ANSWER)measures liquidity and determines whether an organization can pay
back its debt
