MHA 706 Final Exam 2 – Questions With Answers
Cost allocation ✔️ans -assign all overhead costs to the departments that
create the need for such costs, typically the patient services department
Cost pool ✔️ans -overhead amount to be allocated.
consists of the direct costs of one overhead department
Cost driver ✔️ans -the basis on which a cost pool is allocated; for example,
square footage for facilities costs.
Direct method ✔️ans -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 ✔️ans -a cost allocation method that recognizes some of
the overhead services provided by one support department to another
Reciprocal method ✔️ans -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) ✔️ans -ties overhead resource consumption to
charges (or revenues)
Relative value unit (rvu) ✔️ans -ties the use of overhead resources to the
complexity and time required for each service as measured by rvus
Activity-based costing (abc) ✔️ans -a method of cost accounting designed to
identify streams of activity and then to allocate costs differently in different
service lines
Price setter ✔️ans -provider has market dominance and can set it's own
prices
Price takers ✔️ans -perfectly competitive markets, payer dominance,
government programs
, Full-cost pricing ✔️ans -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 ✔️ans -prices for a service are set to cover
incremental, or marginal, costs (generally recovering only direct variable
costs)
Target costing ✔️ans -revenues are projected assuming prices as given in
the marketplace, required profits are subtracted from revenues, remainder is
target cost level
Term loan ✔️ans -a bank loan that lasts for a specific term
Term loan examples ✔️ans -student loans, mortgage
Treasury bonds ✔️ans -bonds issued by the federal government, sometimes
referred to as government bonds.
Corporate bonds ✔️ans -bonds issued by for-profit corporations
Mortgage bond ✔️ans -a bond secured by a lien on real property
Debenture bonds ✔️ans -bonds that are unsecured (i.e., not backed by any
collateral such as equipment).
Municipal bonds ✔️ans -tax-exempt bonds issued by state and local
governments
Current ratio ✔️ans -measures liquidity and determines whether an
organization can pay back its debt
Debt contracts ✔️ans -contain general provisions (maturity, type of debt,
interest rate and type), type of debt, restrictive covenants, and trustee
designation
Call provision ✔️ans -permits the borrower to redeem (pay back) the debt
prior to maturity
Cost allocation ✔️ans -assign all overhead costs to the departments that
create the need for such costs, typically the patient services department
Cost pool ✔️ans -overhead amount to be allocated.
consists of the direct costs of one overhead department
Cost driver ✔️ans -the basis on which a cost pool is allocated; for example,
square footage for facilities costs.
Direct method ✔️ans -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 ✔️ans -a cost allocation method that recognizes some of
the overhead services provided by one support department to another
Reciprocal method ✔️ans -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) ✔️ans -ties overhead resource consumption to
charges (or revenues)
Relative value unit (rvu) ✔️ans -ties the use of overhead resources to the
complexity and time required for each service as measured by rvus
Activity-based costing (abc) ✔️ans -a method of cost accounting designed to
identify streams of activity and then to allocate costs differently in different
service lines
Price setter ✔️ans -provider has market dominance and can set it's own
prices
Price takers ✔️ans -perfectly competitive markets, payer dominance,
government programs
, Full-cost pricing ✔️ans -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 ✔️ans -prices for a service are set to cover
incremental, or marginal, costs (generally recovering only direct variable
costs)
Target costing ✔️ans -revenues are projected assuming prices as given in
the marketplace, required profits are subtracted from revenues, remainder is
target cost level
Term loan ✔️ans -a bank loan that lasts for a specific term
Term loan examples ✔️ans -student loans, mortgage
Treasury bonds ✔️ans -bonds issued by the federal government, sometimes
referred to as government bonds.
Corporate bonds ✔️ans -bonds issued by for-profit corporations
Mortgage bond ✔️ans -a bond secured by a lien on real property
Debenture bonds ✔️ans -bonds that are unsecured (i.e., not backed by any
collateral such as equipment).
Municipal bonds ✔️ans -tax-exempt bonds issued by state and local
governments
Current ratio ✔️ans -measures liquidity and determines whether an
organization can pay back its debt
Debt contracts ✔️ans -contain general provisions (maturity, type of debt,
interest rate and type), type of debt, restrictive covenants, and trustee
designation
Call provision ✔️ans -permits the borrower to redeem (pay back) the debt
prior to maturity
