1 (a). Define the followings:

Cost pool

Cost driver

Direct cost allocation

Step-down cost allocation

Direct Cost

Indirect Cost

Fixed cost

Variable cost

(b) Effective cost drivers, and hence the resulting cost allocation system, must have what two important attributes?

(c) What is the better cost driver for the costs of a hospitals financial services department: patient services department revenues or number of bills generated? Explain your rationale.