Question

Match the following terms to the correct definition:

1. Variable cost
2. Cost driver
3. Activity Based Costing
4. Cost Pool
5. Fixed Cost
6. Target Costing

___     This method of cost estimation assumes each service consumes indirect costs in the same proportion as the department as a whole.

___     The process of setting prices to cover one additional unit of output (product or service).

___     This method estimates the cost of treating individual patient diagnosis over time.

___     This method of cost estimation uses the intensity of the service provided as the basis for allocating overhead.

___     This method assumes all costs within an organization stem from activites.

Answer 1

1. Variable cost - The process of setting prices to cover one additional unit of output (product or service).
2. Cost driver - This method estimates the cost of treating individual patient diagnosis over time.
3. Activity Based Costing - This method assumes all costs within an organization stem from activites.
4. Cost Pool -  This method of cost estimation assumes each service consumes indirect costs in the same proportion as the department as a whole.
5. Fixed Cost - This method of cost estimation uses the intensity of the service provided as the basis for allocating overhead.