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1. Which of the following statements about managerial accounting is incorrect?
a. Managerial accounting information is used primarily by managers in the organization.
b. Managerial accounting information is prepared in accordance with rules established by outsiders (generally accepted accounting principles).
c. Managerial accounting is primarily forward looking as opposed to focusing on historical information
d. Managerial accounting information is used both the organizational level and the subunit (department) level.
e. Budgets are an important managerial accounting tool.
b. Managerial accounting information is prepared in accordance with rules established by outsiders (generally accepted accounting principles).
2. Which of the following statements about cost allocation is(are) most correct?
a. The direct method is conceptually best and least expensive to implement.
b. The reciprocal method is most widely used in practice.
c. The reciprocal method is conceptually best but typically the most expensive to implement.
d. Answers (a) and (b) are correct.
e. Answers (b) and (c) are correct.
c. The reciprocal method is conceptually best but typically the most expensive to implement.
3. Which of the following statements about cost allocation is most correct?
a. The direct method of allocation recognizes services provided by support departments to one another.
b. A cost driver is any grouping of overhead costs that must be allocated.
c. The reciprocal method of allocation represents a compromise between the direct method and the step-down method.
d. A cost pool is the total amount of direct costs incurred by one of the patient service departments.
e. None of the above statements is correct.
4. Effective cost drivers should have which of the following characteristics?
a. They should be perceived as fair.
b. They should create an incentive for cost reduction.
c. They should create an allocation rate based on patient revenues.
d. Answers (a) and (b) are correct.
5. Which of the following statements about activity-based costing is most correct?
a. It uses a top-down approach to cost allocation.
b. It is most useful for assigning costs to departments.
c. It is most useful for assigning costs to individual services.
d. It is easy to apply because it ignores overhead costs.
e. It is less costly to implement than traditional costing methods.
c. It is most useful for assigning costs to individual services.
6. Assume that Goodhealth Clinic has fixed costs of $1 million and a total cost forecast of $1.5 million a volume of 20,000 patient visits. What is the clinic's variable cost rate?
a.$25
7. The Housekeeping Department of Micanopy Hospital has direct costs of $500,000. The hospital's four patient service departments utilize the following amounts of space:
Department A = 1,000 square feet
Department B = 2,000 square feet
Department C = 3,000 square feet
Department D = 4,000 square feet
Assuming that the cost driver for housekeeping costs is the amount of occupied space, what is the allocation of housekeeping costs to Department A?
b.$50,000
8. Assume that Randall Clinic has fixed costs of $500,000 and a variable cost (per visit) rate of $20. What is the total cost forecast for a volume of 5,000 patient visits?
c. $600,000
9. Assume that Lexington Hospital has fixed costs of $10 million and a variable cost (per inpatient day) rate of $200. What is the total cost forecast for a volume of 50,000 patient days?
d. 20 million
10. Which of the following statements about relevant range is most correct?
a. It is the range of salaries that is appropriate for department administrative managers.
b. It is the range of output (volume) that produces a profit for the organization.
c. It is the range of prices that produces a profit for the organization.
d. It is the range of output (volume) that can be efficiently handled by the organization's facilities.
e. It is the range of output (volume) for which the organization's cost structure holds.
e. It is the range of output (volume) for which the organization's cost structure holds.
11. Assume that Methodist Hospital has annual fixed costs of $50 million and a variable cost rate of $200 per inpatient day. What is the average cost per patient day an annual volume of 50,000 patient days?
c. $1,200
12. Which of the following is also called utilization?
b. volume
13. The manager of a clinic estimates 10,000 to 12,000 patient visits next year for their walk-in clinic. This estimate is also referred to as the clinic’s:
c. Relevant range
14. Costs that are known and predictable regardless of volume are called:
b. Fixed
15. An example of a fixed cost might be:
c. Diagnostic equipment
16. If variable cost rate is $10 per visits and volume averages 1,000 per month, what is total variable costs for the year?
d. $120,000
17. The first step in allocating costs is to:
b. Identify the cost pools and drivers
18. Which of the following would not be considered an effective cost driver:
d. Office hours
19. Which cost allocation method allocates support costs to patient services department and is considered the easiest to apply?
c. Direct
20. Which cost allocation method recognizes intrasupport department allocations (partial recognition of one support department to another) and does not recognize full range of interdependencies?
b. Step-down
21. Which cost allocation method fully recognizes all services provided between support departments and is complex and costly to implement?
a. Reciprocal
b. Step-down
c. Direct
d. Activity based
a. Reciprocal
22. Which of the following pricing strategies is most likely to lead to long-term financial sustainability?
a. Full cost
b. Marginal cost
c. Direct cost
d. Indirect cost
e. Variable cost
a. Full cost
23. Which of the following strategies is most likely to ensure profitability on a contract undertaken by a price-taker provider?
a. Full-cost pricing
b. Marginal-cost pricing
c. Target costing
d. Zero-cost pricing
e. Direct-cost pricing
c. Target costing
24. Which of the follow statements best describes the contribution margin?
a. The contribution margin is defined as fixed costs minus variable costs.
b. The contribution margin is the dollar amount of each unit of output that is available first to cover fixed costs and then to contribute to profit.
c. The contribution margin is defined as revenues minus fixed costs.
d. The total contribution margin is defined as the contribution margin multiplied by total revenues.
e. The total contribution margin is defined as the contribution margin multiplied by total costs.
b. The contribution margin is the dollar amount of each unit of output that is available first to cover fixed costs and then to contribute to profit.
25. Which of the following statements regarding the relationship between reimbursement method and risk is(are) most correct?
a. Under capitation, risk is reduced by maximizing the percentage of fixed costs.
b. Under capitation, risk is reduced by maximizing the percentage of variable costs
c. Under fee for service, risk is reduced by maximizing the percentage of fixed costs.
d. Under fee for service, risk is reduced by maximizing the percentage of variable costs.
e. Answers (a) and (d) are correct.
e. Answers (a) and (d) are correct.
26. Consider the following data:Fixed costs = $10 millionVariable cost per inpatient day = $400 Revenue per inpatient day = $1,200 What is the contribution margin?
b. $800
27. Consider the following data:Fixed costs = $10 millionVariable cost per inpatient day = $400Revenue per inpatient day = $1,200What is the breakeven volume (in patient days)?
e. 12,500
28. Consider the following data:Fixed costs = $10 millionVariable cost per inpatient day = $400What revenue per inpatient day is required to obtain a profit of $1 million a volume of 10,000 patient days?
d. $1,500
29. Assume the following cost and revenue data for General Hospital:Fixed costs = $15 millionVariable cost per inpatient day = $250Revenue per inpatient day = $1,000What is the expected profit a volume of 25,000 inpatient days?
e. $3.75 million
30. Assume the following cost and revenue data for General Hospital:Fixed costs = $15 millionVariable cost per inpatient day = $250Revenue per inpatient day = $1,000What is the breakeven volume (in patient days)?
c. 20,000
31. Assume the following cost and revenue data for General Hospital:Fixed costs = $15 millionVariable cost per inpatient day = $250What revenue per inpatient day is required to obtain a profit of $1 million a volume of 25,000 patient days?
a. $890
32. Super Clinics offers one service that has the following annual cost and volume estimates:Variable cost per visit = $10Annual direct fixed costs = $50,000Allocation of overhead costs = $20,000Expected volume = 1,000 visitsWhat price per visit must be set if the clinic wants to make an annual profit of $10,000 on the full cost of the service?
c. $90
33. The difference between full cost and marginal pricing is:
c. Fixed costs
34. The full cost for an inpatient MY FAKE Hospital is $15,000 per day. However, I charge $30,000 per day to make up for losses in the respective ER Department. This practice is called:
b. Price shifting
35. A financial report or statement that shows the revenues and expenses for the entire organization, department or a service is called:
b. P & L Statement
36. Which of the following is not part of a business's strategic plan?
d. Capital budget
37. Budgets are used for
a. planning
b. communication
c. control
d. answers (a) and (b
e. answers (a), (b), and (c)
e. answers (a), (b), and (c)
38. Which of the following statements about budgeting is incorrect?
a. In the conventional approach, the prior budget is used as the starting point.
b. In zero-based budgeting, the prior budget is adopted for the coming year with no changes.
c. All organizations use annual budgets, but most also use quarterly (or more frequent) budgets.
d. Out-year budgets are used more for planning purposes than for control.
e. Bottom-up budgets begin the department level and then are approved by senior management.
b. In zero-based budgeting, the prior budget is adopted for the coming year with no changes.
39. In budgeting, variance is
b. the difference between a realized value and a budgeted, or standard, value
40. Which of the following statements about a flexible budget is most correct?
a. A flexible budget uses realized (actual) prices along with all other original (simple) budget assumptions.
b. A flexible budget uses realized (actual) labor costs along with all other original (simple) budget assumptions.
c. A flexible budget uses realized (actual) supplies costs along with all other original (simple) budget assumptions.
d. A flexible budget uses realized (actual) facilities costs along with all other original (simple) budget assumptions.
e. A flexible budget uses realized (actual) volume along with all other original (simple) budget assumptions.
e. A flexible budget uses realized (actual) volume along with all other original (simple) budget assumptions.
41. The following profit information was taken from Eastside Hospital's budget data:Simple budget: $1.2 millionFlexible budget: $1 millionActual results: $500,000What is the simple profit variance? (Hint: An unfavorable variance is identified by a minus sign.)
c. -$700,000
42. The following profit information was taken from Eastside Hospital's budget data:Simple budget: $1.2 millionFlexible budget: $1 millionActual results: $500,000What is the flexible profit variance? (Hint: An unfavorable variance is identified by a minus sign.)
b. -$500,000
43. Assume that the simple profit variance is -$200,000, while the flexible profit variance is +$200,000. Which of the following statements about this situation is most correct?
a. When the volume forecast error is accounted for, the business lost money.
b. When the volume forecast error is accounted for, the business broke even.
c. The business actually made a profit of $200,000.
d. The business actually made a profit of $400,000.
e. When the volume forecast error is accounted for, the business made money.
e. When the volume forecast error is accounted for, the business made money.
44. Which of the following statements is an organizational objective (as opposed to an organizational goal)?
a. To increase inpatient volume by 3 percent per year
45. A hospital outpatient department budgets for 15,000 visits per year. At the end of the year, the hospital has 12,000 patient visits. When comparing the flexible budget to the simple budget, which of the following will be true?
a. Total expenses in the flexible budget will be lower than in the simple budget
b. Total expenses in the flexible budget will be higher than in the simple budget.
c. Total revenues in the flexible budget will be lower than in the simple budget.
d. Total revenue in the flexible budget will be higher than in the simple budget.
e. Answers (a) and (c) will be true.
e. Answers (a) and (c) will be true.
46. Which of the following variances is a hospital manager most likely to be held accountable for?
a. Labor variance
b. Supplies variance
c. Volume variance
d. Answers (a) and (b)
e. Answers (a), (b), and (c)
d. Answers (a) and (b)
47. Primary tool for senior managers to establish financial goals and monitor results thereof is known as:
c. Budget
48. The starting point for the budgeting process is:
b. Volume forecast
49. Revenue budget includes:
a. Volume details
b. Reimbursement data
c. Non-operating revenues
d. All of the above
d. All of the above
50. Which of the following statements best describes the revenue cycle?
a. It focuses on cash management.
b. It focuses on inventory management.
c. It focuses on receivables management.
d. It focuses on cash, inventory, and receivables management.
e. It focuses on all activities associated with billing and collecting for services.
e. It focuses on all activities associated with billing and collecting for services.
51. The revenue cycle is composed of
a. before-service activities
b. -service activities
c. after-service activities
d. monitoring and reporting activities
e. all of the above activities
e. all of the above activities
52. Which of the following techniques is(are) used to monitor a business's receivables?
a. Average collection period
b. Aging schedule
c. Collections budget
d. Answers (a) and (b)
e. Answers (a), (b), and (c)
d. Answers (a) and (b)
53. Businesses hold short-term securities for which of the following reasons?
a. As a substitute for cash
b. As a temporary repository for cash being accumulated for a specific purpose
c. As a buffer against bad debt losses
d. Answers (a) and (b)
e. Answers (a), (b), and (c)
d. Answers (a) and (b)
54. Which of the following inventory management techniques is(are) currently used by healthcare providers?
a. Just-in-time systems
b. Stockless systems
c. Consigned inventory systems
d. Answers (a) and (b)
e. Answers (a), (b), and (c)
e. Answers (a), (b), and (c)
55. Which of the following operating metrics is used to monitor labor productivity?
c. Full-time equivalents per occupied bed
56. Which of the following techniques is(are) used to interpret operating metrics?
a. Trend analysis
b. Comparative analysis
c. Scale analysis
d. Answers (a) and (b)
e. Answers (a), (b), and (c)
d. Answers (a) and (b)
57. Suppose that a clinic has third-party payer revenues of $10,000 a day. On average, it takes the clinic 50 days to collect from its payers. What will be the steady state receivables balance?
d. $500,000
58. Suppose a hospital writes checks of $100,000 per day and it takes, on average, seven days for them to be received by and clear the banking system. Furthermore, the hospital receives $120,000 in checks daily that take four days to be deposited and credited. What is the hospital's float?
c. $220,000
59. Ocala Clinic's services result in $5,000 in daily billings to third-party payers. On average, it takes the clinic 50 days to collect its receivables. If the interest rate on loans needed to finance receivables (cost of carrying receivables) is 10 percent, what is the clinic's dollar annual cost of financing its receivables balance?
a. $25,000
60. Which of the following statements about aging schedules is(are) most correct?
a. Aging schedules are used to optimize patient flow elder care clinics.
b. Aging schedules are used to prioritize payments to vendors for supply purchases
c. Aging schedules are used to monitor an organization's receivables.
d. Answers (a), (b), and (c) are correct.
e. None of the above is correct.
c. Aging schedules are used to monitor an organization's receivables.
61. Proper management of the revenue cycle to support the billing and collection activities requires:
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