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HCM 416 FINAL STUDY GUIDE EXAM QUESTIONS AND ANSWERS WITH COMPLETE SOLUTIONS VERIFIED
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HCM 416 FINAL STUDY GUIDE EXAM QUESTIONS AND ANSWERS WITH COMPLETE SOLUTIONS VERIFIED What are the formulas for volume variance? Volume Variance = Static costs − Flexible costs What method of cost allocation recognizes no intrasupport department services? Direct Winston Clinic is evaluatin...

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  • November 10, 2024
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  • 2024/2025
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HCM 416 FINAL STUDY GUIDE EXAM QUESTIONS AND

ANSWERS WITH COMPLETE SOLUTIONS VERIFIED


What are the formulas for volume variance?

Volume Variance = Static costs − Flexible costs

What method of cost allocation recognizes no intrasupport department services?

Direct

Winston Clinic is evaluating a project that costs $52,125 and has expected net

cash inflows of $12,000 per year for eight years. The first inflow occurs one year

after the cost outflow, and the project has a cost of capital of 12%. What is the

project's payback?

Year 5

What are the formulas for total variance for revenues and expenses?

Total variance for revenue = Actual revenues less Static budget for revenues

Describe the two approaches to budgeting (conventional vs. zero-based

budgeting).

In the conventional approach to budgeting, the previous, historical budget is used as the

starting point for creating each new budget. Each line on the old budget is examined,

and typically minor changes are made to reflect changes in circumstances. Also, in the

conventional approach, it is common for most budget changes to be applied more or

less equally across departments and programs. In essence, the traditional approach to

budgeting assumes that prior budgets are based on operational rationality, so the main

, issue is determining what changes (typically minor) must be made to the previous

budget.

Zero-based budgeting starts with a clean slate. Unit heads then must fully justify every

line item in their budgets. In effect, departments and programs must justify their very

existence each budget period. Thus, zero-based budgeting is much more effective than

conventional budgeting in controlling operating costs. However, it requires a much

larger expenditure of managerial resources.

Discuss the various methods of cost allocation various methods of cost

allocation and the differences between them?

The three primary methods of traditional cost allocation are (1) the direct method, (2)

the reciprocal method, and (3) the step-down method. Regardless of the method, all of

the support costs within an organization ultimately are allocated from support

departments to the departments that generate revenues for the organization, and hence

create the need for the support services.

The key differences among the methods are how support services provided by one

department are allocated to other support departments. The direct method totally

ignores services provided by one support department to another; the reciprocal method

recognizes all of the intrasupport department services; and the step-down method

represents a compromise that recognizes some, but not all, of the intrasupport

department services.

The dollar amount of overhead services to be allocated is called

Cost Pool

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