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MHA 706 FINAL EXAM QUESTIONS
& ANSWERS
Question: Indirect Costs
CORRECT ANSWER: Are costs associated with shared
resources used by the entire organization
Question: Cost Driver
CORRECT ANSWER: Is the basis on which the cost pool
will be allocated
Question: Cost Pool
CORRECT ANSWER: Is the overhead amount to be
allocated
Question: Overhead departments
CORRECT ANSWER: Are often called costs centers
Question: Patient Service Departments
CORRECT ANSWER: Are often called revenue centers
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Question: Direct Costs
CORRECT ANSWER: Are costs unique and exclusive to
a department
Question: When you divide the "Dollars in the Cost Pool"
by "Total Volume of Cost Driver" - you have determined ....
CORRECT ANSWER: The Allocation Rate
Question: Effective cost drivers should have the following
characteristic(s)
CORRECT ANSWER: Perceived as being fair, Promote
Organizational Cost Reduction
Question: Which of the following is NOT a type of
allocation method.
CORRECT ANSWER: step-up method
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Question: 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.
CORRECT ANSWER: Square footage of the department
Question: 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.
CORRECT ANSWER: False
Question: When using the direct cost allocation system -
often you are allocating the cost of xxxx to Patient Service Departments
CORRECT ANSWER: Support (overhead) departments
Question: Select all of the following options that are
accounting methods to account for "costs" at an individual service level
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CORRECT ANSWER: Activity Based Costing (ABC),
Relative Value Unit (RVU), Time-Driven Activity Based Costing (TDABC), Cost-to-Charge Ratio (CCR)
Question: Select all of the true assumption(s) of the Cost-
to-Charge Ratio Method.
CORRECT 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
Question: Activity based costing (ABC) begins with the
..... that comprise the service provided.
CORRECT ANSWER: Individual Activities
Question: 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