Q&A Hero

Q: variance analysis inputs must stipulate the following: a. the applicable time period b. the services or products delivered or produced c. both of the above d. neither of the above

Q: variance analysis is primarily a matter of: a. margin analysis b. differential analysis c. input-output analysis d. none of the above

Q: strictly speaking, when referring to standard quantity we should be referring to: a. a quantity of materials b. a quantity of hours c. either of the above d. neither of the above

Q: in variance analysis the applicable standard: a. could be a standard quantity b. could be standard hours c. equates to what should have been used rather than what was actually used d. a & b only e. all of the above

Q: it is possible to perform variance analysis as a: a. two-variance analysis b. three-variance analysis c. five-variance analysis d. a & b only e. all of the above

Q: using what you have learned about finance to date, is the contribution margin the same as the operating margin? a. always b. in some circumstances c. never d. not applicable

Q: sensitivity analysis: a. answers questions about what may happen if major assumptions change b. allows the manager to plan for a variety of possibilities in different scenarios c. is a "what if" proposition d. answers questions about what may happen if certain predicted events do not occur e. all of the above f. a, b and c only g. a and b only

Q: volume variance represents the portion of overall variance caused by a difference between: a. the expected workload and the actual workload b. the budgeted and the actual quantity of input needed per unit of output c. actual and expected price of an input

Q: in regard to evaluating capital expenditure budget proposals, "to be capitalized" means the expenditure would be placed on the balance sheet as an additional capital cost that is recognized as an __________.

Q: capital expenditure budgets involve the acquisition of long-lasting assets. in order to complete a capital expenditure budget, decisions must be made about the __________ long-term use of funds.

Q: when evaluating capital expenditure proposals, management planning must involve the allocation of available financial resources for projects that promise to reap returns in the future. this applies only to for-profit organizations, as not-for-profit organizations do not have to be concerned about such issues.

Q: types of capital expenditure proposals commonly include proposals to acquire new equipment, proposals to fund the expansion of existing programs, and/or proposals to acquire capital assets for future use.

Q: under the startup cost capital expenditure budgeting concept, management may decide that the cost of starting up a new service line or a new program should be included in the capital expenditure budget as part of the original investment.

Q: regarding cash flow reporting methods, the "net present value" method is a discounted cash flow method, while the "payback" method is based on profitability.

Q: "cumulative cash flow" means the accumulated effect of cash inflows and cash outflows must be added and/or subtracted to show the overall net accumulated result.

Q: the capital expenditure budget may sometimes be identified by another name, such as "capital spending plan".

Q: capital expenditure budgets are necessary because they plan, monitor and control long-term financial issues.

Q: within a proposed capital expenditure, the answer to what is the cost of capital: a. is generally provided in the form of a computation b. the amount of the answer depends on the method used to illustrate the cost c. the amount of the answer does not depend upon any particular method used to illustrate the cost d. a & b e. any of the above

Q: one type of capital expenditure proposal involves a request to fund the expansion of an existing program. which of the following selling points allow this type of funding proposal to be easier to prepare and thus more likely to succeed? a. statistics are available from the existing program to use within the proposal --yes b. startup costs would be negligible or none --yes c. the proposal will be compared with other department funding requests --no d. a & b e. a & c f. b & c g. all of the above

Q: a common type of capital expenditure proposal involves replacing existing equipment with new equipment. the appropriate arguments for a replacement proposal should typically include which of the following: a. argue that the new equipment is more technologically advanced b. argue that productivity will be increased with the new equipment c. make a comparison between the costs of upgrading existing equipment versus replacement with new equipment d. a & b e. a & c f. b & c g. all of the above

Q: the jones and brown medical practice bought new equipment for a total price of $50,000. the old equipment that was being replaced was traded in on the new equipment. the seller allowed $10,000 for the equipment that was traded in. what is the resulting jones and brown cumulative cash flow? a. $50,000 b. $40,000 c. $10,000 d. none of the above

Q: midtown clinic bought new equipment for $50,000. the clinic then sold its old equipment that is being replaced for $6,000.what is the resulting cumulative cash flow? a. $50,000 b. $44,000 c. $6,000 d. none of the above

Q: when making decisions about capital funding, management will typically consider the concept of what return could be realized on alternative investments of the capital that is available. this concept is known as: a. opportunity cost b. alternative cost c. capital rationing cost d. any of the above e. none of the above

Q: which of the cash flow reporting methods does not take the time value of money into account? a. payback method --- does not b. accounting rate of return ---- does not c. net present value yes, does d. internal rate of return yes, does e. a & b f. c & d g. a, b & c h. a, c & d i. b, c & d

Q: which of the cash flow reporting methods does not take profitability into account? a. payback method b. accounting rate of return c. net present value d. internal rate of return e. none of the above

Q: useful life is generally an important assumption in which of the following capital expenditure proposals? a. acquiring new equipment b. upgrading existing equipment c. funding new programs d. a & b e. a & c f. b & c g. all of the above

Q: which of the following are reasons for capital asset spending on new space and/or equipment? a. to create a new nursing facility b. to expand capacity in the laboratory department c. to create administrative space for a new home care program d. all of the above

Q: which of the following are reasons for capital asset spending on new equipment? a. to improve productivity in the emergency department b. to comply with federal requirements in the pharmacy department c. to comply with new state legislative requirements in the clinic d. a & b e. a & c f. b & c g. all of the above

Q: review midtown general hospitals financial committee choices about the old laundry building in the preceding question. which of these choices will typically involve expending operating budget funds instead of capital expenditure budget funds? a. keep the existing laundry building in its present condition through ongoing repairs and maintenance b. renovate either one of the buildings and replace the equipment c. contract for commercial laundry services d. a & b e. a & c f. b & c g. all of the above

Q: the midtown general hospitals financial committee discussion about the old laundry building is in progress. the cfo points out that (1) keeping the existing laundry building in its present condition will require ongoing repair and maintenance expenses; (2) renovating the larger building will cost more than renovating the existing smaller old building; and (3) hiring a commercial laundry service will involve contracting for services. which of these choices will involve expending capital funds? a. keep the existing laundry building in its present condition through ongoing repairs and maintenance b. renovate either one of the buildings and replace the equipment c. contract for commercial laundry services d. a & b e. a & c f. b & c g. all of the above

Q: the midtown general hospitals financial committee agenda includes planning questions about the old building that houses the hospitals laundry operation. which of the following alternatives should the committee members consider? a. keep the existing laundry building in its present condition b. renovate the existing old building and replace the laundry equipment c. move the laundry operation to another larger building on campus that will need to be renovated d. move out of the building and hire a commercial laundry service instead e. all of the above

Q: the hilltop health system cfo is briefing new board members about hilltop financial issues. the cfo explains that hilltops capital spending plan may expend funds: a. to acquire a new reserve for depreciation b. for capital assets already existing and in place c. to acquire new capital assets d. a & b e. a & c f. b & c g. all of the above

Q: a new mri machine has been approved and placed in the capital expenditures budget. when this expenditure occurs, the mri machine will be : a. recognized as an additional capital cost b. placed on the balance sheet c. recognized as net worth d. a & b e. a & c f. b & c

Q: capital expenditures involve the acquisition of assets that are long lasting, such as: a. land and buildings b. equipment with an appropriate number of years of useful life c. supplies d. operating expenses for the next year e. a & b f. a, b & c g. a, b & d

Q: the hillwood health system owns six hospitals, the largest of which is greentree medical center. each of the six hospitals has its own capital expenditure budget and operating budget, and there is also a comprehensive health system financial budget. responsibility for the health systems comprehensive financial budget rests with which of the following employees? a. the greentree medical centers cfo b. the health systems controller c. the health systems vice president of finance d. any of the above

Q: an organizations comprehensive, or overall, financial budget may typically encompass the: a. budget to acquire capital assets for future use (an eight to ten year future range) b. capital expenditures budgets for the next five years c. operations budget for the next twelve months d. a & b e. a & c f. b & c g. all of the above

Q: a capital expenditure proposal for a new program: a. is sometimes allowed to disregard startup costs b. will be comparatively easier to prepare c. will typically be shorter than a proposal to replace equipment d. all of the above e. none of the above

Q: the information flowing from these inputs to the capital expenditure budget would generally result in: a. an estimate of the capital dollars required b. placement into the capital expenditure plan if dollar amount was larger enough c. placement into the capital expenditure plan regardless of the dollar amount d. a revision of the organizations strategic plan e. a & b f. a & c g. a & d

Q: the types of operating budget items that might require such inputs into the capital expenditure budget, depending upon the dollar amount required, include: a. space renovations b. additional capital equipment purchases c. capital equipment refurbished/upgraded d. all of the above e. none of the above

Q: if operating budget items require additional capital equipment, then inputs to the capital expenditure budget may have to be taken into consideration. these inputs would typically include the following: a. capacity b. staffing plan c. operating revenue forecast d. a & b e. a & c f. b & c g. all of the above

Q: the type of proposal affects its: a. size b. scope c. coordination with the strategic plan d. a & b e. a & c f. b & c

Q: other types of capital expenditure proposals may also sometimes be paired as either/or choices. which of the following proposal types could also be easily presented as a pair for such either/or choices? a. acquiring capital assets for future use b. funding expansion of existing programs c. funding new programs d. a & b e. a & c f. b & c

Q: certain types of capital expenditure proposals may sometimes be paired as either/or choices. which of the following proposal types could easily be presented as a pair for such either/or choices? a. acquiring new equipment b. upgrading existing equipment c. replacing existing equipment with new equipment d. a & b e. a & c f. b & c g. any of the above

Q: the type of capital expenditure proposal that may be the most difficult to accomplish is a proposal to: a. acquire capital assets for future use b. fund new programs c. acquire new equipment d. none of the above

Q: rationing available capital funds is often necessary. when evaluating capital expenditure budget proposals the following factors may commonly be considered: a. necessity for the request b. cost of capital to the organization c. return that could be realized on alternative investments d. all of the above e. a and b only

Q: the process involved for capital expenditure funding requests varies according to the organization. the process may be influenced by: a. size b. the corporate culture c. politics d. all of the above e. a and b only

Q: the capital expenditures budget usually consists of: a. spending for capital assets already acquired and in place b. spending for new capital assets c. both of the above d. neither of the above

Q: building an operating budget includes steps that involve both __________ and actual construction of the budget.

Q: within a departmental operating budget, general and administrative expenses will probably be mostly __________ costs.

Q: in regard to working with operating budgets, there are two common types of responsibility centers: __________ centers and __________ centers.

Q: the operating budget is the instrument through which __________ are quantified in financial terms.

Q: foundation transactions should always be included in the operating budget.

Q: capital expenditure budgets can cover a five- to ten-year period because they may take a futuristic view.

Q: building a budget means making a series of assumptions. thus the budget-building process should end with a review of strategy and objectives.

Q: dividing operating costs into fixed and variable is necessary: a. for the construction of a flexible budget b. for the construction of a static budget c. as a part of the advance preparation process d. a & c e. b & c f. all of the above

Q: which of these statements is correct? a. flexible budgets can be used to review prior performance of a department b. static budgets may be used to plan a goal for the budget period c. both of the above d. neither of the above

Q: the budget process should include: a. review of strategy b. review of objectives c. forecast of workload d. identifying special use of resources e. a & b f. b & c g. a, b & c h. all of the above

Q: the following information is part of the budget preparation process: a. available resources b. budget scope c. budget format to be used d. a & c e. b & c f. all of the above g. none of the above

Q: the concept of the flexible budget addresses: a. control b. planning c. workloads d. all of the above

Q: to determine the relevant range of volume or activity, it is necessary to: a. define the relevant range b. analyze expected patterns of cost c. separate the costs into fixed or variable d. define a single level of activity e. a, b & c f. b, c & d g. all of the above

Q: the computation of a static budget requires: a. three simple calculations b. two multi-level calculations c. one single calculation d. none of the above

Q: when the budgeted amount is a financial variable reported by the accounting system, a variance: a. is the difference between an actual result and a budgeted amount b. may or may not be a standard amount c. may or may not be a benchmark amount d. a & b e. a & c f. all of the above g. none of the above

Q: in the case of healthcare organizations, volume generally means: a. number of patient days for inpatient services b. number of procedures for outpatient services c. number of patient days for outpatient services d. a & b e. b & c f. none of the above

Q: if volume rises or falls, a. variable costs will not change b. fixed costs will not change (within a wide range) c. variable costs will change d. a & b e. b & c f. none of the above

Q: at horizon hospital there are separate nursing departmental budgets for inpatient nursing and for outpatient nursing. how many of the following expenses are likely to be identified in these two nursing departmental budgets? a. nursing salaries b. nursing administration c. quality management d. data processing e. a & b f. c & d g. all of the above

Q: how many of the following expenses are likely to be allocated in a nursing departments operating budget? a. dietary b. community relations c. human resources d. medical records e. a & b f. c & d g. b & c h. all of the above

Q: within a managers departmental operating budget, which of the following will probably not be included? a. interest expense b. amortization of loan costs c. the departments computer service contracts d. a & b e. a & c f. all of the above

Q: within a departmental operating budget, which of the following will probably be allocated? a. patient-related expense b. supporting patient care c. administrative expense d. a & b e. a & c f. all of the above

Q: the south fork nursing facility has received a grant to provide additional social services for its residents. the grant requires separate accounting for these restricted funds. two extra staff have been hired using grant dollars. the administrator argues that the staff salaries should be included in the south fork operating budget so the full time equivalent counts will be correct. what is correct operating budget procedure this case? a. grant expenditures such as these staff salaries should not be included in south forks budget because the grant money is restricted and requires separate accounting b. it is all right to include all the grant operations in the south fork budget because the south fork budget is an operating budget c. as a compromise, include these two staff salaries in the budget, but not any other grant expenditures d. any of the above

Q: the horizon healthcare foundation was formed to solicit donations that support certain initiatives of the horizon hospital. the foundation is a separate legal entity that meets all the relevant irs criteria for foundations. david, the hospital controller, has prepared an operating budget for the coming year that includes all revenues and expenses of the foundation within the hospitals budget. peggy, the hospital cfo, tells david to remove the foundation expenses and revenues. what is correct operating budget procedure in this case? a. leave the foundation revenues and expenses in the hospitals operating budget b. remove the foundation revenues and expenses because it is a separate legal entity c. remove the foundation revenues and expenses because peggy doesnt get along with the foundations director d. none of the above

Q: operating budgets typically: a. contain expenses necessary to operate the facility b. reflect revenues from all sources c. have a futuristic view d. all of the above e. none of the above

Q: a profit center operating budget may be expected to show: a. operating costs only b. operating costs and revenues c. operating costs and capital expenditures d. none of the above

Q: the manager is responsible for a particular set of activities in which type of responsibility center? a. the profit center b. the cost center c. the revenue center d. a & b e. b & c f. none of the above

Q: which of the following statements are correct? a. managers in cost center responsibility centers are responsible for controlling both costs and revenues b. managers in profit center responsibility centers are responsible for controlling both costs and revenues c. managers in profit center responsibility centers do not have to report to a supervisor above them d. none of the above

Q: it is important to properly use the language of the world of finance. this is sometimes difficult to do when words sound and look much the same, but have very different meanings. accordingly, using what you know and what you have observed about healthcare finance: which of the following usages are correct? a. "capitol" represents the financial structure of the organization b. capital represents the financial structure of the organization c. capitol represents a building housing a legislative assembly (such as the u.s. congress) d. capital represents a building housing a legislative assembly (such as the u.s. congress) e. a & d f. b & c g. none of the above

Q: jim, the radiology department director, believes the annual operating budgeting process is a tool used to increase his department through the addition of staff and supplies. susan, the laboratory department director, believes the annual operating budgeting process is a tool used to control costs. dr. smith, the emergency department director, considers the budgeting process a nuisance and believes he should simply increase all revenues and expenses by five percent for the coming year to achieve a budget. whose viewpoint represents the proper objective for the budgeting process? a. dr. smiths view b. jims view c. susans view d. none of the above

Q: one objective for the budgeting process of hilltop hospital, a not-for-profit community hospital, is to create cost awareness: a. throughout the community it serves b. throughout its own organization c. by the federal government regulators d. by the state legislators that control medicaid costs

Q: an organizations budgeting process should include the expression of its major policies: a. in writing and in qualitative terms b. in writing and in subjective terms c. both verbally and in writing d. both in writing and through training sessions e. none of the above

Q: objectives of the budgeting process should include the provision of a: a. basis for evaluating financial performance in accordance with healthcare industry standards and policies b. basis for evaluation financial performance in accordance with the organizations own standards, policies and plans c. both of the above d. neither of the above

Q: certain grant monies received by healthcare organizations may be transactions outside the operating budget because: a. they are restricted funds b. they may require separate accounting and reporting c. the american hospital association objectives for budgeting (listed in chapter 15) says they should not be commingled funds d. all of the above e. a and b only f. a and c only