Hcad 760 Exam 2 Questions With Verified
Answers.
Cost allocation - answerassign all overhead costs to the departments that create the need for
such costs, typically the patient services department
cost pool - answerOverhead amount to be allocated.
Consists of the direct costs of one overhead d...
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
Debt Contracts - answer✔contain general provisions (maturity, type of debt, interest rate and
type), type of debt, restrictive covenants, and trustee designation
call provision - answer✔permits the borrower to redeem (pay back) the debt prior to maturity
Flexibility - answer✔issuers may want callability because it provides ________________
impact of call provisions for lenders - answer✔helps avoid some riskiness because they can take
advantage of lower market interest rates
impact of call provisions for borrowers - answer✔increases the risk of debt financing
Bond Ratings - answer✔debt ratings that reflect the probability of default
speculative bonds - answer✔sometimes called junk bonds, have a higher probability of default,
and thus a higher rate of interest. These bonds would be attractive to investors who have a high
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