HCM 416 Chapter 7 Quiz

Select all of the true assumption(s) of the Cost-to-Charge Ratio Method. a) Charges reflect the level of intensity of the service provided b) Each service consumes overhead costs in the same proportion as the department as a whole c) Ties the use of overhead resources to the complexity and time required for each service as measured by relative value units (RVUs) d) Focuses on costing multiple services provided to individual patients across time

A and B *Charges reflect the level of intensity of the service provided *Each service consumes overhead costs in the same proportion as the department as a whole

Select all of the following options that are accounting methods to account for "costs" at an individual service level. a) Relative Value Unit (RVU) b) Balance Sheet Pro-Forma (BS) c) Cost-to-Charge Ratio (CCR) d) Time-Driven Activity Based Costing (TDABC) e) Activity Based Costing (ABC)

A, B, and C Relative Value Unit (RVU), Cost-to-Charge Ratio (CCR), Activity Based Costing (ABC)

Select all the correct response(s): One use of managerial accounting information within a health service organization is to... a) Identify the lowest feasible price when prices are negotiated. b) Determine the profitability of different service lines c) Add additional non-value adding work to the organization d) Set prices on services

A, B, and D *Identify the lowest feasible price when prices are negotiated *Determine the profitability of different service lines *Set prices on services

Select all the correct response(s) When a provider has market dominance, and can set it's own prices (within reason), it is said to be a price setter. In other situations, providers are price takers. Select the response that may describe a situation where a provider is a "price-taker." a) The provider has a monopoly on the market b) It is a perfectly competitive market c) The provider is dealing with a government payer/program d) There is payer dominance

B,C, & D *It is a perfectly competitive market *The provider is dealing with a govt program *There is payer dominance

The key to cost allocation under Activity-Based-Costing is to identify the activities that performed to provide a particular service and then aggregate the costs of the activities. What are the steps required to implement ABC?

IEACC *Identify the relevant activities *Estimate the cost of each activity *Assign cost drivers for each activity *Collect activity data for each service *Calculate the total costs of service by aggregating activity costs

Scenario Analysis

Is a technique in which alternative scenarios are analyzed.

Capitation rates are quoted

Per Member Per Month Basis (PMPM)

Target Costing is used by

Price Takers

To break even...

Revenues must equal total costs

Select the correct word/phrase that is missing: Activity based costing (ABC) begins with the ___________ that comprise the service provided. a) Time b) Organization costs c) Individual Activities d) Overhead Costs

c) Individual Activities

Select all the correct response Under the marginal cost pricing, prices for a service are set to cover ________________ costs. a) direct b) indirect c) full d) incremental

d) incremental