Resources and methods for cost estimation MCQs With Answer

Resources and methods for cost estimation MCQs With Answer

This collection of MCQs is designed for M.Pharm students studying Pharmacoepidemiology & Pharmacoeconomics and focuses on resources and methods for cost estimation. The questions cover identification, measurement and valuation of costs, top-down and bottom-up approaches, micro- and gross-costing, data sources (primary and secondary), allocation of overheads, capital costing, opportunity costs, and common tools such as time-motion studies and activity-based costing. Use these items to test and deepen your understanding of practical and theoretical aspects of costing in healthcare economic evaluations, and to prepare for exams and applied research tasks where accurate cost estimation is essential.

Q1. Which costing method involves identifying every input item and measuring its quantity and unit price to estimate total cost?

• Top-down costing
• Micro-costing (ingredient approach)
• Gross-costing
• Tariff-based costing

Correct Answer: Micro-costing (ingredient approach)

Q2. Which data source is most appropriate for obtaining long-term resource use and real-world service patterns for cost estimation?

• Cross-sectional survey of clinicians
• Randomised controlled trial administrative logs
• Claims/insurance administrative databases
• Expert opinion Delphi panel

Correct Answer: Claims/insurance administrative databases

Q3. In top-down costing, how are total costs typically allocated to individual services or patients?

• Direct measurement of each input used by the patient
• Using average unit costs or allocation bases from aggregate expenditures
• Replacing market prices with shadow prices
• Applying time-motion study results to individual cases

Correct Answer: Using average unit costs or allocation bases from aggregate expenditures

Q4. What is the main advantage of activity-based costing (ABC) over traditional cost allocation methods?

• It requires less data collection
• It allocates overheads uniformly across departments
• It ties costs to specific activities and cost drivers, improving accuracy
• It uses tariffs as proxies for actual costs

Correct Answer: It ties costs to specific activities and cost drivers, improving accuracy

Q5. Which of the following best describes opportunity cost in health economic costing?

• The market price paid for a resource
• The accounting depreciation value of capital equipment
• The value of the next-best alternative forgone when a resource is used
• The invoiced charge billed to patients

Correct Answer: The value of the next-best alternative forgone when a resource is used

Q6. When valuing volunteer time in a societal perspective cost analysis, which approach is most appropriate?

• Set the value to zero because no payment was made
• Value it at the volunteer’s market wage or a shadow wage
• Use the clinician’s salary as a proxy
• Double-count as indirect cost

Correct Answer: Value it at the volunteer’s market wage or a shadow wage

Q7. Which cost category includes patient transportation and informal caregiver time?

• Direct medical costs
• Direct non-medical costs
• Indirect costs
• Capital costs

Correct Answer: Direct non-medical costs

Q8. Depreciation of a hospital MRI scanner for costing exercises is an example of which type of cost?

• Variable recurrent cost
• Direct non-medical cost
• Capital cost
• Opportunity cost of labor

Correct Answer: Capital cost

Q9. Which method is most appropriate when precise, patient-level costing is required for a small sample of patients?

• Top-down average costing
• Gross-costing using tariffs
• Bottom-up micro-costing
• Using national average unit costs only

Correct Answer: Bottom-up micro-costing

Q10. The WHO-CHOICE database is primarily used for which purpose in cost estimation?

• Measuring time spent by clinicians at the patient bedside
• Providing standardized unit cost estimates for health interventions across countries
• Collecting patient-reported out-of-pocket expenses
• Recording individual-level resource use from hospitals

Correct Answer: Providing standardized unit cost estimates for health interventions across countries

Q11. Which allocation method spreads hospital overhead costs sequentially from service departments to patient-care departments?

• Activity-based costing (ABC)
• Step-down (sequential) allocation
• Bottom-up micro-costing
• Market-based allocation

Correct Answer: Step-down (sequential) allocation

Q12. In pharmacoeconomic studies, why might researchers use charges or tariffs cautiously as proxies for costs?

• Because charges always equal true economic costs
• Because tariffs are universally standardized across hospitals
• Because charges and tariffs can reflect pricing policies, profit margins, or subsidies, and may not represent resource consumption
• Because using tariffs eliminates the need for sensitivity analysis

Correct Answer: Because charges and tariffs can reflect pricing policies, profit margins, or subsidies, and may not represent resource consumption

Q13. Time-driven activity-based costing (TDABC) differs from traditional ABC primarily by:

• Ignoring time as a cost driver
• Estimating cost per time unit and multiplying by time to perform activities
• Using tariffs instead of actual resource prices
• Allocating costs solely on number of patients

Correct Answer: Estimating cost per time unit and multiplying by time to perform activities

Q14. Which method of costing is most vulnerable to recall bias when used to measure patient-level resource use?

• Extraction from electronic health records
• Prospective time-motion study
• Patient self-reported resource-use questionnaires (interviews)
• Administrative claims data extraction

Correct Answer: Patient self-reported resource-use questionnaires (interviews)

Q15. For capital items, which approach ensures costs are annualized and reflect time preference when included in cost estimates?

• Treating full purchase price in the year of purchase without adjustment
• Annualizing capital costs using a discount rate and expected useful life
• Excluding capital items entirely
• Using current market rent only

Correct Answer: Annualizing capital costs using a discount rate and expected useful life

Q16. Which secondary data source is commonly used to derive unit costs for drugs and consumables in a country?

• Patient focus groups
• National drug price lists or formularies
• Time-motion observations
• Clinical trial efficacy reports

Correct Answer: National drug price lists or formularies

Q17. When estimating productivity losses due to illness, which method values lost work time using average wage rates?

• Friction cost method
• Willingness-to-pay method
• Human capital approach
• Activity-based costing

Correct Answer: Human capital approach

Q18. Which technique is most appropriate to test the robustness of cost estimates to uncertain input parameters?

• Descriptive statistics only
• Sensitivity analysis (one-way, multi-way, probabilistic)
• Ignoring parameter uncertainty
• Fixed-point estimation

Correct Answer: Sensitivity analysis (one-way, multi-way, probabilistic)

Q19. Shadow pricing is used in costing to:

• Replace market prices with arbitrary values
• Reflect the true economic value of a resource when market prices are absent or distorted
• Increase charges billed to insurers
• Eliminate the need for resource measurement

Correct Answer: Reflect the true economic value of a resource when market prices are absent or distorted

Q20. For multi-center costing studies aiming for comparability, which practice improves standardisation of unit cost estimates?

• Allow each center to use its own arbitrary price list
• Use a common costing protocol with standardized definitions and unit cost templates
• Exclude overheads from all centers
• Rely solely on expert opinion without documentation

Correct Answer: Use a common costing protocol with standardized definitions and unit cost templates

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