Expert Answers

1. Budgets normally cover a period of:
5 years
2 years
3 years
1 year

2. The following is an example of a _____________ budget:
“The budget for the radiology department is different at 90 percent occupancy than at 80 percent occupancy.”

3. Effectiveness is a relationship between:
Outputs and organizational goals
Inputs and outputs
Inputs and organizational goals
None of the above.

4. (TCO 3) Which of the following is the first step in any budgetary process?
Define standard treatment protocols
Define required departmental volumes
Define standard cost profiles
Define volumes of patients

5. (TCO 3) Your controller has told you that the marginal profit of DRG 209 (major joint procedure) for a Medicare patient exceeds the marginal profit for an average charge patient. Why might this occur?
High fixed costs of treatment
Low Medicare payment
High prices
Low prices

6. (TCO 2) A statement that reports inflows and outflows of cash during the accounting period in the categories of operations, investing, and financing, is called a(an):
Income statement
Statement of retained earnings
Balance sheet
Statement of cash flows
Report of management

7. (TCO 2) _____ is the most important financial metric to review to determine long-term financial viability.
Return on equity
Total margin
Days cash on hand
Hospital cost index
None of the above

1. Formulate your answer based on the below information. The intensity of care delivered dropped from a budgeted case mix of 0.90 to an actual case mix of 0.85. What dollar effect did this have on actual costs?

You have been asked by management to explain the variances in costs under your inpatient capitated contract. The following data is provided. Use the following data to calculate the variances.

2. The following information has been prepared for a home health agency.
Budget Actual
Wage Rate per Hour $16.00 $17.00
Fixed Hours 320 320
Variable Hours per Relative
Value Unit (RVU) 1.0 1.1
Relative Value Units (RVUs) 1,000 1,200
Labor Costs $21,120 $27,880
Cost per RVU $21.12 $23.23

Be sure to specify whether the variance is favorable or unfavorable.

What is the amount of variance that is attributed to the change in labor productivity?

3. (TCO 2) Explain the difference between the accrual basis of accounting and the cash basis of accounting.?

4. (TCO 2) What are the double-entry accounting system and the duality concept? How are they related?