HADM 6305 Which of the following is most likely a fixed cost

Multiple Choice (4 points Each) – Choose the best answer for each of the following:

1. Which of the following is most likely a fixed cost? a. Income taxes, b. The cost of merchandise sold, c. Depreciation taken on equipment, d. The cost of commissioned sales people, e. All of the above.

2. Which of the following is most likely a variable cost? a. Depreciation taken on an office building, b. Wages for production workers, c. Interest on corporate bonds, d. Rent on an office building, e. None of the above.

3. In the long run, a. All costs are fixed. b. All costs are mixed. c. All costs are variable. d. Paying a monthly ‘budget’ amount for utilities is a fixed cost.

4. The use of operating leverage a. requires a teeter totter to be installed in the office, b. requires the firm to have only variable costs, c. increases the breakeven level, d. eliminates all fixed costs, e. none of the above.

5. Operating leverage is a. Always bad b. Always good c. Good, when the economy is bad d. Good when the economy is good

6. The goal of breakeven analysis is to a. avoid paying taxes, b. earn as much as your competitors, c. set variable costs equal to fixed costs, d. determine long-term investment levels, e. determine the minimum volume of business to avoid a loss.

7. Which costs are generally not allocated? a. fixed costs b. direct costs c. variable costs d. indirect costs e. none of the above

8. In a multi-service facility, which of the following is direct cost? a. Electricity, b. Custodial services, c. Depreciation on the building, d. Nurse pay in one department, e. All of the above are direct costs.

9. A good cost driver does all of the following except a. Allocates costs fairly. b. Helps in controlling costs. c. Can be traditional or activity based. d. Provides greater benefits than its cost. e. All of the above are elements of a good cost driver.

10. Comparing a capitated environment to a fee-for-service environment; in a capitated environment a. each additional visit creates costs without a corresponding increase in revenues, b. the total revenues line on a CVP graph is flat rather than upward sloping, c. less utilization rather than more utilization enhances profitability, d. providers of health services also take on an insurance function, e. all of the above.

11. Activity based costing is a. Generally better than traditional costing, but more expensive to implement than traditional costing. b. Is only suitable for large organizations. c. Generally not as accurate as traditional costing. d. Is generally less expensive to implement than traditional costing.

12. In allocating support services to other support service departments, which method is easiest? a. Direct method b. Reciprocal method c. Step-down method

13. In allocating support services to other support service departments, which method is most accurate? a. Direct method b. Reciprocal method c. Step-down method

14. Which of the following is not true? a. A price setter usually has a large market share, b. Price setters must watch costs more closely than price takers, c. A health provider in a competitive market is usually a price taker, d. A health care provider can be both a price setter and a price taker, e. All of the above are true.

15. Health care providers are a. Price takers. b. Price setters. c. A price setter or price taker, depending on their costing method. d. Either a price setter or price taker, depending on the competition.

16. Which is more likely to be used by a price taker? a. Target costing, b. Full cost pricing, c. Cross subsidization, d. Marginal cost pricing.

17. Which is more likely to be used by a price setter wanting to provide a full range of services to constituents at various wealth levels? a. Target costing b. Full cost pricing c. Cross subsidization d. Marginal cost pricing

18. To allocate the cost of Financial Services in a Health Care setting a. Patient revenues is a better cost driver. b. The number of bills is a better cost driver. c. We are better to not allocate the cost of Financial Services. d. Using both the number of bills and patient revenues may be the best method.

19. Government intervention in healthcare, to insure care for the poor, will likely move healthcare providers toward a. Being price takers and using target costing b. Being price setters and using target costing c. Being price setters and using cross subsidization d. Being price takers and using cross subsidization

20. If long-run prices are set on the basis of marginal costs, the organization may a. not recover its total costs. b. not recover its direct costs. c. temporarily build market share. d. not recover its overhead fixed costs. e. all of the above.

21. To set capitation rates, which method is best? a. fee-for-service method, b. demographic approach, c. budgetary, or cost approach, d. in general, one approach is as good as another.

22. Which is least likely to change? a. Corporate goals b. Vision statement c. Values statement d. Mission statement e. Corporate objectives

23. Which of the following is most likely the shortest? a. Vision statement b. Corporate goals c. Values statement d. Mission statement e. Corporate objectives

24. Using the bottom-up, or participatory approach a. budgets are first developed by individuals who are most knowledgeable regarding their departments’ or programs’ financial needs. b. often initially results in an organizational budget that is not financially feasible. c. requires component budgets to be sent back to the original preparers for revision. d. does not reflect top management’s perspective from the start. e. All of the above.

25. Which of the following will provide the largest differences? a. Comparing the static budget to the flexible budget, b. Comparing the static budget to the actual results, c. Comparing the actual results to the flexible budget, d. We cannot tell without the actual details.

26. During an economic downturn a. Conventional budgeting is more useful because the budget is likely to have a great deal of change. b. Zero-based budgeting is more useful because the budget is likely to have a great deal of change. c. Conventional budgeting is more useful because the previous budget provides a good starting point. d. Zero-based budgeting is more useful because the previous budget provides a good starting point.

27. A cash budget is useful a. For liquidity planning. b. To project cash inflows and outflows. c. Can show when the organization can invest excess cash. d. Can show when the organization needs to borrow cash. e. All of the above.