Deck 8: Budgets

Question 1

What does a statistical budget project?

A) expenses for providing services
B) expenses for and revenues from providing services
C) weighted encounters
D) revenues from all sources

Answer 1

weighted encounters

Question 2

What is the most important advantage of zero-based budgeting over other budgeting philosophies?

A) Upper management has more control of the budget
B) All managers are forced to look for alternatives when preparing their budgets.
C) Unit or department managers must participate.
D) It takes the least amount of effort to prepare.

Answer 2

All managers are forced to look for alternatives when preparing their budgets.

Question 3

Monthly budget review is ____.

A) too frequent for a small healthcare business
B) a federal requirement for publicly held corporations
C) a way to identify cash flow problems and embezzlement
D) conducted during forensic audits

Answer 3

a way to identify cash flow problems and embezzlement

Question 4

In a typical medical facility, the cash budget will be the same for each month of a fiscal year.

Question 5

Developers of a healthcare facility's capital budget must know ____.

A) the original cost of all existing capital items
B) the dates when capital items will need to be replaced
C) the current values of all existing capital items
D) the vendors from which each capital item was purchased

Question 6

In a revenue budget for a healthcare business, net medical revenues is gross medical revenues minus ____.

A) costs of labor
B) percent discount
C) contractual adjustments
D) bad debt expense

Question 7

In a hospital's physical therapy department, a therapist can perform 2 units of service per hour. The expected service needs in the next fiscal year is 200 units of service per week. How many physical therapist FTEs are needed for this workload?

A) 2.0
B) 2.5
C) 3.0
D) 4.0

Question 8

Bottom-up budgeting ____.

A) is a drinking game at accountant parties
B) starts with a bottom line of zero
C) is the least labor-intensive for unit or department managers
D) fails when unit or department managers overstate operating costs

Question 9

Which of the following is a characteristic of a capital budget?

A) Covers the next fiscal year
B) Sums up the depreciation of capital assets
C) Projects purchases of capital assets
D) Is comprised of departmental operating budgets

Question 10

An expenditure budget for the next fiscal year is the combined operating budgets for the departments or units, plus the next year's capital budget, plus annual depreciations and amortizations.

Question 11

The budgeting philosophy that bases unit or departmental budgets on the current fiscal years budget and an adjustment factor is ____.

A) bottom-up budgeting
B) top-down budgeting
C) incremental budgeting
D) zero-base budgeting

Question 12

The annual budget combines which two annual budgets?

A) capital and revenue
B) cash and expenditure
C) statistical and revenue
D) revenue and expenditure

Question 13

A hospital gets 60% of its revenue from Medicare and Medicaid patients, 38% from patients with healthcare insurance that base reimbursements on the Medicare model, and 2% of its revenue from uninsured patients who pay the full standard fees for medical services. The hospital increases its base service charge by 10%. If all other factors remain the same, revenues from patient care will increase by only 0.2%.

Question 14

The authorized personnel budget refers to the costs of employing licensed professionals such as physicians, nurses, and pharmacists.

Question 15

Which of the following is an allocated cost for a department within a healthcare facility?

A) equipment rental
B) liability insurance
C) employee pensions
D) continuing education

Question 16

What should a business use to predict which months will have higher than average payments for services?

A) a cash budget
B) an expense budget
C) a statistical budget
D) breakeven analysis

Question 17

When conducting breakeven analysis for a new service at a healthcare facility, ____.

A) you solve for the volume of the new service
B) you include supervisory salary and benefits as a variable cost
C) you include supplies used by the new service as a fixed cost
D) you solve for the price of the new service

Question 18

A nursing home unit manager with 20 employees is told that her personnel budget will not be increased in the next fiscal year. However, her unit is expected to provide 5% more services than in the current fiscal year. Which of these processes is most likely to achieve those goals?

A) Requiring staff to work 2 hours of overtime on average each week
B) Telling staff to "work smarter, not harder"
C) Reducing full-time positions and adding part-time positions with no benefits
D) Adding an employee but reducing everyone's pay by 5%

Question 19

Salaries and benefits is almost always the largest expense category for hospitals and nursing homes.

Question 20

A large hospital uses line item control of its budget. Variance analysis shows that one unit is exceeding its budget for Repairs due to a manufacturing flaw in a commonly used device that is no longer under warranty. The unit manager can ____.

A) transfer money from the Rental and Leasing account to the Repairs account
B) approve a budget amendment that increases the Rental account budget
C) go over budget on Repairs and submit a Variance Report
D) request a meeting with upper management to change the budget

Question 21

A skilled nursing home unit is in such demand that it always is full. A full unit requires a staff of 15 (8 day, 5 evening, and 2 night shift workers) every day. Explain why the nursing home will need to hire more than 21 FTE workers.

Question 22

Describe the process of benchmarking costs for budgeting purposes.

Question 23

A new viral disease sweeps the nation: gray squirrel encephalitis. The disease can be transmitted via blood products. Blood donor centers are required to screen each donor's blood for gray squirrel encephalitis. This immediately increases the cost of blood products by 10%. Describe the budget process for dealing with this sudden change.

Question 24

A master operating budget for a hospital is comprised of ____.

A) statistical and capital budgets
B) all the departmental or unit budgets
C) authorized personnel and revenue budgets
D) direct and indirect costs

Question 25

Management's plan for a future period, expressed in dollars, is called the ____________________.

Question 26

The number of units of service provided for patient care is referred to as ____________________.

Question 27

When a budget is balanced, expenditures equal borrowing plus ____.

A) gross revenues
B) net revenues
C) cash and short-term investments
D) capital assets

Question 28

A commonly used purchase price cutoff for an item to be on a capital budget is $____________________.

Question 29

Breakeven analysis of a new medical service for elderly patients shows that 900 units of service are required to break even. At that volume, fixed costs are half the total costs. The predicted volume of service is 800 units. Which of the following is a realistic choice that will make the new medical service profitable?

A) Reduce the variable cost for the service.
B) Increase the charge for the service.
C) Increase volume by 20% from reducing the charge by 10%.
D) Remove indirect costs from the fixed cost calculation.

Question 30

Variance analysis is most commonly performed on ____.

A) operating budgets
B) statistical budgets
C) breakeven calculations
D) budget amendments

Question 31

The FTE value for an employee who works 10 hours per day, 2 days per week, 52 weeks a year is ____________________.

Question 32

The first step in developing the first budget for a small medical practice is to prepare a(n) ____________________.

Question 33

A physician chooses to create different revenue accounts for physical examinations, office visits, and office surgical procedures. What advantage does this have over creating a combined revenue account for all medical services?

A) Easier to make revenue accounting entries
B) Provides a simpler chart of accounts
C) Easier to see which type of service is generating the most revenues
D) Provides a simpler line item control

Question 34

The manager of a hospital Blood Bank learns that the American Red Cross will increase its charges for blood products by 7% next year. What will she need to do when it is time to prepare the Blood Bank's operating budget?

Question 35

Hospital management, in response to the 7% increase in the costs of blood products, declares that physicians will be trained on conserving blood products, and that this will decrease blood usage by at least 7%, thereby eliminating the need to increase the Blood Bank's supply budget. Describe the flaws in this plan.