Question 1

What does a statistical budget project?

Accepted Answer

C

Question 2

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

Accepted Answer

Zero-based budgeting requires managers to justify all of their budgeted expenditures, rather than only changes from the previous year's budget. This encourages them to look for cost-effective alternatives and ensures that every expense is necessary and aligned with the organization's goals.

Question 3

Monthly budget review is ____.

Accepted Answer

Monthly budget reviews are a proactive approach to managing a business's finances, allowing for the early identification of cash flow issues and potential embezzlement. This practice is not too frequent even for small businesses, is not a federal requirement specifically for publicly held corporations, and is not limited to forensic audits.

Question 4

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

Accepted Answer

The cash budget in a medical facility can vary each month due to fluctuations in patient volume, changes in healthcare services provided, seasonal variations in illnesses, and differences in payment cycles from insurance companies or patients.

Question 5

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

Accepted Answer

Knowing the dates when capital items will need to be replaced is crucial for planning and budgeting purposes in a healthcare facility's capital budget. This helps in forecasting future expenses and ensuring that the facility remains equipped with functioning, up-to-date equipment.

Question 6

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

Accepted Answer

Net medical revenues are calculated by subtracting contractual adjustments from gross medical revenues. Contractual adjustments are the differences between what is billed to patients or insurance companies and what is actually expected to be received, based on pre-negotiated rates.

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?

Accepted Answer

Given that a therapist can perform 2 units of service per hour, and the expected service needs are 200 units per week, we calculate the number of hours needed per week as 200 units / 2 units per hour = 100 hours per week. Assuming a full-time equivalent (FTE) works 40 hours a week, the number of FTEs needed is 100 hours / 40 hours per FTE = 2.5 FTEs.

Question 8

Bottom-up budgeting ____.

Accepted Answer

Bottom-up budgeting can fail when unit or department managers overstate operating costs, as it relies on accurate input from these managers to build the budget from the ground up.

Question 9

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

Accepted Answer

Capital budgets focus on planning for the acquisition and investment in capital assets, such as buildings, machinery, and equipment, projecting their purchases over a period that extends beyond the next fiscal year.

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.

Accepted Answer

An expenditure budget is a financial plan that outlines the expected expenses of an organization over a specific period of time. It includes the operating budgets of the various departments or units, as well as the capital budget, which outlines the planned expenditures on long-term assets. Additionally, it includes annual depreciations and amortizations, which are non-cash expenses that reduce the value of assets over time.

Question 11

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

Accepted Answer

Incremental budgeting involves adjusting the previous year's budget by a certain factor or percentage to account for inflation, growth, or other changes, rather than starting from scratch or imposing a budget from the top.

Question 12

The annual budget combines which two annual budgets?

Accepted Answer

The annual budget combines the revenue and expenditure budgets.

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%.

Accepted Answer

Raising the base service charge will have no effect on revenues from Medicaid, Medicare, and the insurers, since those payers reimburse based on Diagnosis Related Groups, not on the hospital's service charges. Only the patients paying full price for their care will pay 10% more. Since they contributed only 2% of revenues, the increase in revenues will be 10% x 2% = 0.2%.

Question 14

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

Accepted Answer

The authorized personnel budget typically refers to the total costs associated with all personnel authorized to be employed by an organization, not just licensed professionals. It includes salaries, benefits, and other employment costs for all staff, not exclusively for those with professional licenses.

Question 15

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

Accepted Answer

Liability insurance is an example of an allocated cost for a department within a healthcare facility because it is a cost that is distributed across various departments based on certain criteria, such as department size or revenue, rather than being directly attributable to any specific department's operations.

Question 16

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

Accepted Answer

A cash budget helps a business forecast cash inflows and outflows, allowing it to predict periods of higher or lower cash availability, including months with higher than average payments for services.

Question 17

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

Accepted Answer

Breakeven analysis involves solving for the volume of the new service at which total revenues equal total costs, thus indicating no profit or loss.

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?

Accepted Answer

Reducing full-time positions and adding part-time positions with no benefits can help manage the budget by lowering overall personnel costs, allowing the unit to provide more services without increasing the budget. This approach can be more cost-effective than paying overtime, reducing pay across the board, or simply urging staff to increase efficiency without a concrete strategy.

Question 19

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

Accepted Answer

Salaries and benefits typically represent the largest expense for hospitals and nursing homes due to the labor-intensive nature of healthcare services, requiring a significant number of skilled professionals to deliver care.

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 ____.

Accepted Answer

The unit manager can request a meeting with upper management to change the budget because the variance is due to a manufacturing flaw in a commonly used device that is no longer under warranty.

Quiz 8: Budgets