Accounting Multiple Choice Qs

(a) $25,000

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 (b) $20,000 (c) $15,000 (d) $10,000 (e) $5,000

(b) 24.5 percent

One of Sunrise Hospital's vendors offers terms of 2/10, net 30. What is the approximate cost (to the nearest tenth of a percent) of not taking the discount if Sunrise stretches payment and typically pays at Day 40? (a) 21.4 percent (b) 24.5 percent (c) 27.6 percent (d) 30.7 percent (e) 33.8 percent

(c) $220,000

Suppose a hospital writes checks of $100,000 per day and it takes, on average, seven days for those to be received 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? (a) $100,000 (b) $120,000 (c) $220,000 (d) $240,000 (e) $440,000

(d) $500,000

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? (a) $10,000 (b) $50,000 (c) $250,000 (d) $500,000 (e) $750,000

(b) $125

Ten physicians have just completed their residencies in internal medicine and are considering opening a group practice. They estimate the practice would have the following annual cost structure: Annual fixed costs $750,000 Variable cost per visit $ 50 If volume in the first year is estimated to be 10,000 visits, what price per visit must be set if the practice wants to achieve accounting breakeven (i.e., profit = $0)? (a) $140 (b) $125 (c) $75 (d) $50 (e) $90

Float

is the difference between the disbursement float and the collection float.

(b) a product, or service to which cost is to be assigned.

A cost object is: (a) a collection of costs to be assigned. (b) a product, or service to which cost is to be assigned. (c) the tool used to charge cost dollars to user departments. (d) the primary function of a responsibility accounting system. (e) a common cost.

(a) a collection of similar costs to be assigned.

A cost pool is: (a) a collection of similar costs to be assigned. (b) the combined result of decisions made by different responsibility center managers. (c) the primary function of a responsibility accounting system. (d) the amount of cost that has been allocated, say, 10%, to a user department. (e) the tool used to allocate cost dollars to user departments.

(d) indirect cost

A cost that is not traceable and is incurred for the benefit of more than one department is called a(n): (a) controllable cost (b) direct cost (c) hidden cost (d) indirect cost

(b) $193,500

A hospital plans to carry out 15,000 tests per year (1,250 per month), each taking 1.5 direct labor hours. If the direct labor rate is $8 per hour and a pay raise of 15% is awarded half way through the year (after six months on July 1), what is the total annual labor budget? (a) $120,000 (b) $193,500 (c) $180,000 (d) $207,000 (e) $210,000

(e) Use full cost pricing

All of the following are characteristics of price takers except: (a) Have little or no market power (b) Operate in highly competitive markets or markets dominated by large insurers or government payers (c) Use target costing as a management strategy (d) Focus on utilization and cost structure (e) Use full cost pricing

(a) More than $100 per unit of service

Assume 100 percent of a healthcare organization's patients are covered by two payers. The full cost to the organization for providing one unit of service is $100. Payer A pays $50 per unit of service. In order for the healthcare organization to remain financially viable in the long run, Payer B must be charged which of the following? (a) More than $100 per unit of service (b) Less than $100 per unit of service (c) Exactly $100 per unit of service (d) No amount is sufficient; the healthcare organization cannot survive (e) None of these statements are correct

(a) More than $100 per unit of service

Assume 100 percent of a healthcare organization's patients are covered by two payers. The full cost to the organization for providing one unit of service is $100. Payer A pays $50 per unit of service. In order for the healthcare organization to remain financially viable in the long run, Payer B must be charged which of the following? (a) More than $100 per unit of service (b) Less than $100 per unit of service (c) Exactly $100 per unit of service (d) No amount is sufficient; the healthcare organization cannot survive (e) None of these statements are correct.

(d) $11

Assume a clinical laboratory is considering a new test. Here are the key assumptions: Annual fixed direct costs = $20,000. Annual overhead allocation = $10,000. Variable cost per test = $5. Expected volume = 5,000 tests. What price should be set under full cost pricing? (a) $5 (b) $7 (c) $9 (d) $11 (e) $13

(a) $5

Assume a clinical laboratory is considering a new test. Here are the key assumptions: Annual fixed direct costs = $20,000. Annual overhead allocation = $10,000. Variable cost per test = $5. Expected volume = 5,000 tests. What price should be set under marginal cost pricing? (a) $5 (b) $7 (c) $9 (d) $11 (e) $13

(d) Cross-subsidization

Assume a governmental payer reimburses Mercy Hospital at a rate that covers only 60 percent of the cost of providing one inpatient day. In contrast, Mercy Hospital negotiates with private insurers for a rate that covers greater than 100 percent of the cost of providing one inpatient day. Which of the following best describes this type of management strategy? (a) Overcharging (b) Concierge pricing (c) Discounted pricing (d) Cross-subsidization (e) Full cost plus pricing

(b) $96.09

General Hospital is considering entering into a contract with CareShare HMO to provide all inpatient services for CareShare's 50,000 members. General Hospital has assembled the following actuarial information: Service Category Inpatient Days per 1,000 Cost/Day General 220 $1,700 Surgical 150 $3,000 Psychiatric 85 $ 950 Maternity 70 $1,900 Assuming that General Hospital needs to receive a premium that allows for administrative costs and a profit (risk) margin equal to 10 percent of the final per member per month (PMPM) premium, what is the minimum PMPM that General Hospital would be willing to accept? (a) $86.48 (b) $96.09 (c) $95.13 (d) $1,037.75 (e) $100

(c) faces a high level of risk

Hospitals may adopt an aggressive or a conservative working capital policy. An aggressive policy means that a hospital (a) holds high levels of cash and inventories (b) faces a low level of risk (c) faces a high level of risk (d) has a low level of flexibility

(a) liquidity to decrease, whereas expected profitability would increase

If a hospital moves from a "conservative" working capital policy to an "aggressive" policy, it should expect __________. (a) liquidity to decrease, whereas expected profitability would increase (b) expected profitability to increase, whereas risk would decrease (c) liquidity would increase, whereas risk would also increase (d) risk and profitability to decrease

(b) $95,000

Langley Memorial Hospital is buying supplies worth $100,000 from a Brookswood Medical Supplies Inc., which offers credit terms of 5/10, net 30. What will the actual payment be if Langley Memorial Hospital paid within 10 days? (a) $90,000 (b) $95,000 (c) $100,000 (d) $105,000 (e) $110,00

(c) $150,000

Mercy Hospital operates an on-site laboratory. Total (direct and allocated) costs associated with the laboratory are estimated to be $500,000. Of the $500,000, Mercy estimates that $350,000 could be eliminated if the laboratory were closed. Which of the amounts below reflects the indirect costs of the laboratory? (a) $500,000 (b) $350,000 (c) $150,000 (d) $850,000 (e) Can't tell from the information provided

(d) $200,000

The Housekeeping Department of Marshfield Clinic has direct costs of $1,000,000. The clinic's four patient services departments utilize the following amounts of space: Department A 5,000 square feet Department B 10,000 square feet Department C 15,000 square feet Department D 20,000 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 B? (a) $500,000 (b) $400,000 (c) $300,000 (d) $200,000 (e) $100,000

true

The classification of costs as direct or indirect depends on the unit (i.e., organization or department) of analysis.

d) Total Revenues - Total Variable costs - Total Fixed costs = Total Profit

The correct equation that is used for Cost Volume Profit analysis is: (a) Total Revenues + Total Variable costs - Total Fixed costs = Total Profit (b) Total Revenues - Total Variable costs + Total Fixed costs = Total Profit (c) Total Revenues + Total Variable costs + Total Fixed costs = Total Profit d) Total Revenues - Total Variable costs - Total Fixed costs = Total Profit

(e) $4,000 unfavorable

The following revenue data is provided for one of the low-sugar calorie meals provided by the Dietary Department at St. Paul's Health Center. What is the meal's total revenue variance? (a) $24,000 unfavorable (b) $24,000 favorable (c) $20,000 favorable (d) $4,000 favorable (e) $4,000 unfavorable

a) direct method; step-down method

The method that allocates support costs to producing departments without considering interactions that may exist among the support departments is the ____________________, while the method that allocates support costs to both support and producing departments is the ____________________. (a) direct method; step-down method (b) direct method; direct method (c) step-down method, direct method (d) reciprocal method; direct method (e) reciprocal method; step-down method

c) hospitals purchase goods on credit.

Trade credit is created when: (a) patients return unacceptable goods. (b) patients receive services on credit. (c) hospitals purchase goods on credit. (d) current assets exceed current liabilities.

true

True or False: The goal (purpose) of cost allocation is to assign all overhead costs to the activities (primarily departments) that cause the costs to be incurred.

(b) the static budget and flexible budget; the flexible budget and actual results.

Volume variance is the difference between ______________________ and price (rate) variance is the difference between ___________________________. (a) the static budget and actual results; the static budget and flexible budget. (b) the static budget and flexible budget; the flexible budget and actual results. (c) the flexible budget and actual results; the static budget and flexible budget. (d) the flexible budget and actual results; the static budget and actual results. (e) the flexible budget and actual results; the static budget and actual results.

(c) It is a factor that causes variation in a cost.

What is a cost driver? (a) It is the largest single category of cost in a company. (b) It is a fixed cost that cannot be avoided. (c) It is a factor that causes variation in a cost. (d) It is an indirect cost that is essential to the business.

(d) A budget that adjusts for changes in the volume of activity.

What is a flexible budget? (a) A budget that does not change through the budget period. (b) A budget that shows a detailed schedule of expected sales for the budget period. (c) A budget that does not change as volume changes. (d) A budget that adjusts for changes in the volume of activity.

Per unit fixed costs and total variable costs.

Which costs will change with an increase in activity within the relevant range? (a) Total fixed costs and total variable cost. (b) Per unit fixed costs and total variable costs. (c) Per unit variable cost and per unit fixed cost. (d) Per unit fixed cost and total fixed cost.

(a) Full cost

Which of the following pricing strategies is most likely to lead to long-term financial stability? (a) Full cost (b) Marginal cost (c) Direct cost (d) Indirect cost (e) Variable cost

c) It is most useful for assigning costs to individual services.

Which of the following statements about activity-based costing (ABC) 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.

e) All of these statements are correct.

Which of the following statements about the step-down method of cost allocation is most correct? (a) The step-down method requires that overhead departments be ranked by the amount of services they provide to one another. (b) The step-down method does not allocate costs from each overhead department to every other overhead department. (c) The step-down method is less complex than the reciprocal method. (d) The step-down method is more complex than the direct method. e) All of these statements are correct.

(e) It focuses on all activities associated with billing and collecting for services.

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.

(a) Uses the knowledge of all the staff to build a fair budget.

Which of the following statements can be considered to be an advantage of a participatory approach to budgeting? (a) Uses the knowledge of all the staff to build a fair budget. (b) The cheapest method of producing a budget. (c) Reduces the level of budget negotiation between staff. (d) Participation in the process is time consuming. (e) Reduces the level of control.

(b) Contribution Margin will increase and Break-Even Point will decrease.

Which of the following would take place if a hospital were able to reduce its variable cost per unit? (a) Contribution Margin will increase and Break-Even Point will increase. (b) Contribution Margin will increase and Break-Even Point will decrease. (c) Contribution Margin will decrease and Break-Even Point will increase. (d) Contribution Margin will decrease and Break-Even Point will decrease. (e) Contribution Margin will increase and Break-Even Point will have No effect

(c) Graph 3

Which of the graphs in the figure below illustrates the behavior of total variable costs? (a) Graph 1 (b) Graph 2 (c) Graph 3 (d) Graph 4

(d) variable costs per unit will remain constant and fixed costs per unit will fluctuate.

Within the relevant range: (a) both total variable costs and total fixed costs will remain constant. (b) both total variable costs and total fixed costs fluctuate. (c) fixed costs per unit will remain constant and variable costs per unit will fluctuate. (d) variable costs per unit will remain constant and fixed costs per unit will fluctuate.

(c) requires that all programs be justified and prioritized.

Zero-based budgeting (a) does not adjust costs for the expected level of activity. (b) is used when no increases in budgets are allowed. (c) requires that all programs be justified and prioritized. (d) assumes that departments are entitled to at least the current level of spending. (e) None of the above.

c) A statistics budget

_______________ is generally prepared as the first step in preparing the operating budget. (a) A revenue budget (b) An expense budget (c) A statistics budget (d) A cash budget (e) A capital budget