Deck 11: Variance Analysis

Question 1

The two questions variance analysis focuses on are

A) Is output greater than or less than expected and is the difference a matter of concern
B) Is financial performance better or worse than expected and is the difference a matter of concern
C) Is output greater than or less than expected and are managers responsible for the difference
D) Is financial performance better or worse than expected and are managers responsible for the difference

Answer 1

B

Question 2

The purpose of variance analysis is to

A) Explain differences in actual and budgeted expenses
B) Determine if managers can control the factors driving differences between actual and budgeted expenses
C) Hold managers accountable for changes that negatively impact an organization
D) Determine if and how operations need to be altered

Answer 2

D

Question 3

Managers should be credited or praised when

A) Budget variances are favorable and the factors driving the variance are controllable
B) Budget variances are unfavorable and the factors driving the variance are controllable
C) Budget variances are favorable and the factors driving the variance are uncontrollable
D) Budget variances are unfavorable and the factors driving the variance are uncontrollable

Answer 3

A

Question 4

Managers should be held accountable for

A) Favorable budget variances are favorable when the factors driving the variance are controllable
B) Unfavorable budget variances are unfavorable when the factors driving the variance are controllable
C) Favorable budget variances are favorable when the factors driving the variance are uncontrollable
D) Unfavorable budget variances are unfavorable when the factors driving the variance are uncontrollable

Question 5

A cost variance includes the impact of all the following factors EXCEPT

A) Changes in price of inputs
B) Changes in productivity
C) Changes in amount of activities needed to produce an output due to changes in the type of output produced
D) Change in the quantity of output produced

Question 6

A price variance examines the difference between

A) The budgeted and actual per unit cost of inputs
B) The budgeted and actual number of inputs used to complete an activity
C) The budgeted and actual number of activities used to produce an output
D) The budgeted and actual number of outputs produced

Question 7

An intensity variance examines the difference between

A) The budgeted and actual per unit cost of inputs
B) The budgeted and actual number of inputs used to complete an activity
C) The budgeted and actual number of activities used to produce an output
D) The budgeted and actual number of outputs produced

Question 8

The variance that examines the difference between the budgeted and actual number of outputs produced is

A) Cost variance
B) Volume variance
C) Price variance
D) Efficiency variance
E) Intensity variance

Question 9

The variance that examines the difference between the budgeted and actual activities taken to produce an output is

A) Cost variance
B) Volume variance
C) Price variance
D) Efficiency variance
E) Intensity variance

Question 10

The formula for the volume variance is

A) (Actual output-Budgeted output)*Budgeted cost/output
B) ((Actual cost/Actual input)-(Budgeted cost/Budgeted input))*Actual quantity of input used
C) (Actual inputs/Actual activity-Budgeted inputs/Budgeted activity)*Budgeted cost/input* Actual activities produced
D) (Actual activity/Actual output-Budgeted activity/Budgeted output)*Budgeted cost per activity*Actual output

Question 11

The formula for the efficiency variance is

A) (Actual output - Budgeted output)*Budgeted cost/output
B) ((Actual cost/Actual input) - (Budgeted cost/Budgeted input))*Actual quantity of input used
C) (Actual inputs/Actual activity - Budgeted inputs/Budgeted activity)*Budgeted cost/input * Actual activities produced
D) (Actual activity/Actual output - Budgeted activity/Budgeted output)*Budgeted cost per activity*Actual output

Question 12

The cost variance is the sum of the

A) Volume, price, and efficiency variances
B) Price, efficiency, and intensity variances
C) Efficiency, intensity, and volume variances
D) Intensity, volume, and price variances

Question 13

An increase in the proportion of older and sicker patients in a provider's patient mix would be identified by a larger

A) Price variance
B) Efficiency variance
C) Intensity variance
D) Volume variance

Question 14

An increase in the time necessary to complete an activity,

A) Price variance
B) Efficiency variance
C) Intensity variance
D) Volume variance
E)g., take a history and physical, would be identified by a larger

Question 15

A decrease in the number of patients treated would create

A) Unfavorable volume variance
B) Favorable volume variance
C) Unfavorable price variance
D) Favorable price variance

Question 16

Which of the following would NOT increase the intensity of care needed by a patient and the amount of resources required to deliver the care?

A) Improving the quality of care delivered
B) Sicker patient populations
C) Increase in the number of patients treated
D) Legislative mandates

Question 17

Which of the following would create an unfavorable price variance beyond the control of the manager?

A) An increase in demand and/or reduction in supply of an input
B) Unnecessary use of overtime
C) An increase in the number of activities, i.e., test or procedures ordered
D) An increase in the number of activities, i.e., tests and procedures that must be redone due to errors

Question 18

Which variance is least likely to be in the control of healthcare managers?

A) Price variance
B) Efficiency variance
C) Intensity variance
D) Volume variance

Question 19

Which variance is most likely to be in the control of healthcare managers?

A) Price variance
B) Efficiency variance
C) Intensity variance
D) Volume variance

Question 20

The variance analysis decision rule that minimizes the number of expenses or object codes that must be examined is

A) A dollar threshold
B) A percentage threshold
C) The AND combination rule
D) The OR combination rule

Question 21

The chief weakness with using the dollar threshold decision rule to determine which variances to investigate is

A) Although the dollar amount may be large it could be a very low percentage of total outlays for an input
B) It would require investigation of small dollar variance that are a high percentage of the total outlay for an input
C) It may allow expenses to over-run their budgets by large dollars amounts or percentages and not be examined
D) It maximizes the number of line items that must be examined
E) All of the above

Question 22

Variance reporting is used to

A) Improve operations
B) Evaluate manager's performance
C) Evaluate the accuracy of planning and forecasting processes
D) Evaluate the accuracy of expense estimation processes
E) All of the above

Question 23

To avoid going over budget, managers postpone discretionary until the end of the year.

Question 24

The total variance must always equal the sum of the price, efficiency, intensity, and volume variances.

Question 25

The total variance must always equal the sum of the price, efficiency, and intensity variances.

Question 26

Over-production would create an unfavorable and non-controllable volume variance.

Question 27

Performance improvement requires that only unfavorable variances be examined.

Question 28

The primary difference between monthly and year-end variance reports is monthly reports are used to evaluate management performance and year-end reports are designed to identify and correct excessive resource consumption.