Question 1

The nurse manager is creating the budget for the next fiscal year. Because the client census has been higher in the past year, more supplies were used. Which type of cost does this reflect?

Accepted Answer

1. Fixed costs are costs that remain the same for the budget period regardless of the activity level of the organization, such as insurance premiums.
2. Variable costs depend on and change in direct proportion to client volume and acuity, such as client care supply expenses.
3. Direct costs are expenses that directly affect client care, such as salaries for nurses.
4. Zero-based costs are not a cost classification.

Question 2

The chief nurse officer (CNO) is planning the budget for the coming year. A new position has been added to the nursing administration cost center. The CNO is determining how many benefit hours should be allocated for this new position. Which days should the CNO include in this calculation? Note: Credit will be given only if all correct choices and no incorrect choices are selected. Select all that apply.

Accepted Answer

1. Sick days are benefit days.
2. Weekend days are not benefit days.
3. Vacation days are benefit days.
4. Holidays are benefit days.
5. Bereavement days are benefit days.

Question 3

A nurse educator is asked by the chairperson of the department to submit a list of equipment that could be used to meet the department's goals. The list includes projectors, computers, office supplies, and computer-assisted programs. How would the educator categorize the materials?

Accepted Answer

1. An expense budget is a comprehensive budget that lists salary and nonsalary items that reflect patient care objectives and activity parameters for the nursing unit.
2. A revenue budget is a projection of expected income for a budget period based on volume and mix of patients, rates, and discounts.
3. A capital budget is a component of the budget plan that includes equipment and renovations needed by an organization in order to meet long-term goals.
4. An operating budget is the organization's statement of the expected revenues and expenses for the upcoming year.

Question 4

The nurse manager is reviewing the previous month's budget and notes a favorable efficiency variance of the full-time equivalents (FTEs). Which options may be reasons for this favorable variance? Note: Credit will be given only if all correct choices and no incorrect choices are selected. Select all that apply.

Accepted Answer

1. Greater client acuity than allowed for in the budget would likely result in an unfavorable efficiency variance.
2. Using more resources than the budget allows would result in an unfavorable efficiency variance.
3. Understaffing the unit would mean fewer nursing salary hours. This would result in a favorable efficiency variance but would not be a good long-term plan for quality of care.
4. If client acuity is lower, fewer staff members are needed. This would result in a favorable efficiency variance.
5. If agency nurses were used to supplement staff, the efficiency variance would be unfavorable.

Question 5

During an interview with a potential employee, the nurse manager tells the individual that an additional 10% of the hourly rate will be paid for working the 7:00 p.m. to 7:00 a.m. shift. What is another way the manager could have described this difference in pay?

Accepted Answer

1. Overtime is paid to personnel who work more than 40 hours per week. Historically, overtime is calculated by multiplying the amount of overtime worked by 1.5 times the hourly rate.
2. Most facilities use a set percentage to be paid to personnel who work evenings, nights, weekends, and holidays, which is known as a shift differential.
3. Premiums are fixed dollar amounts added to the base rate of an employee who has earned a certification or has some advanced clinical achievement.
4. Cost-of-living raises are factored into budget projections and are not related to shift work.

Question 6

A nursing executive is comparing the entire hospital financials for the month and notes that the medical laboratory's revenue is higher than environmental services. What is a possible explanation?

Accepted Answer

1. An increase in charges by the laboratory is not significant in this instance.
2. Environmental services does not charge clients for its services; it is a non-revenue-producing cost center.
3. The laboratory does charge clients for its services; it is a revenue-producing cost center.
4. The nursing unit does affect laboratories' revenue, but this is not applicable to the question.

Question 7

A client's spouse is concerned about the cost of hospitalization. The nurse says, "Because your spouse is on Medicare, the hospital will be paid according to the DRG." What does the nurse mean by this statement?

Accepted Answer

1. Total cost is the amount of the charges for which the client is billed. Medicare reimbursement does not equal this amount.
2. An average for the costs is not a payer amount used by the healthcare industry.
3. Medicare does not pay based upon the usual cost of the procedure.
4. Medicare payment for inpatient services is currently made at a predetermined specific rate for each Medicare recipient based on the patient's diagnosis. Care is classified into diagnosis-related groups (DRGs).

Question 8

A hospital's budget is incremental. Which statement by the nurse manager reflects use of this type of budget? Note: Credit will be given only if all correct choices and no incorrect choices are selected. Select all that apply.

Accepted Answer

1. Developing an incremental budget may begin with documentation of the previous year's actual expenses.
2. The disadvantage of an incremental budget is that managers quickly learn to spend all that is in their budget for a specific line item. If budgets are based on the previous year's performance, having budgeted money left over means it is likely that the current year's budget will be cut.
3. Justification of all activities and expenditures is a characteristic of a zero-based budget.
4. Incremental or line-item budgeting is fairly simple and straightforward.
5. Starting with a decreased budget is a form of zero-based budget.

Question 9

The nurse manager tells the staff that this year's budget numbers will not change, even if census drops over the rest of the year. How should the staff interpret this information?

Accepted Answer

1. A fixed budget is one in which budgeted amounts are set regardless of changes that occur during the year, such as patient volume or program activities.
2. An incremental or line-by-line budget lists each expense item or category on a separate expense line. It is not possible to tell from this description if the budget is incremental.
3. A variable budget is developed with the understanding that adjustments to the budget may be made during the year based on changes in revenue, patient census, utilization of supplies, and other expenses.
4. A zero-based budget assumes the base for projecting next year's budget is zero. It is not possible to tell if the budget being described is a zero-based budget.

Question 10

Every month the chief financial officer (CFO) reviews the budget with the hospital's board of directors. The CFO requests a million dollars to purchase a new MRI (magnetic response imaging) unit for the radiology department. Which category best describes this request?

Accepted Answer

1. An MRI machine would be revenue producing.
2. A capital expense is an expense that is above a set dollar amount, such as $10,000, and that must be approved by the board of directors.
3. The cost of this machine is not variable.
4. Allocation of funds is not specific to the type of budgetary expenditure.

Question 11

A nurse manager of a medical unit and a nurse manager of a critical care unit are discussing their personnel budgets. The medical unit budget is higher than the critical care unit budget. What are plausible reasons for this difference? Note: Credit will be given only if all correct choices and no incorrect choices are selected. Select all that apply.

Accepted Answer

1. A higher turnover rate will increase personnel costs because of the need for more personnel to train new employees.
2. The costs of remodeling are not included in the personnel budget.
3. Increased client acuity generally makes personnel costs rise.
4. Better management tends to mean a more stable staff, which decreases expenditures.
5. Premium pay increases personnel costs.

Question 12

With the current healthcare industry focus on managed care, nurses must be more cost conscious. Which option is an example of a nurse being cost conscious?

Accepted Answer

1. The nurse and the nurse manager do not have time nor is it their responsibility to review a client's hospital bill.
2. The nurse can use resources wisely to decrease costs to the client and the hospital.
3. The nurse manager does not review client costs on a daily basis.
4. The materials management director does look for less expensive materials to provide client care supplies and hospital supplies, but it is not the responsibility of the nurse manager to direct this person's work.

Question 13

The nurse manager of a critical care unit creates the operating budget with the knowledge that a minimum of two professional nurses must be paid per shift regardless of the patient census. Which group determines this standard?

Accepted Answer

1. The hospital makes the final determination of which staffing ratios are considered safe for their units. This determination may be made with the input of nursing administration and nursing personnel, but the final determination becomes an institutional policy.
2. This determination may be made with the input of nursing administration and nursing personnel, but the final determination becomes an institutional policy.
3. The Joint Commission assures that the institution is following its own policies.
4. This determination may be made with the input of nursing administration and nursing personnel, but the final determination becomes an institutional policy.

Question 14

The medical-surgical nursing manager notices the education expenditure for the month is over budget. How should the manager deal with this difference?

Accepted Answer

1. An expenditure report for the month would not explain the variance.
2. A variance report provides a rationale for over expenses for the month that could result from a variety of unexpected expenses.
3. Non-revenue is not relevant to determining why the unit is over budget.
4. Expense line budgeting is not relevant to determining why the unit is over budget.

Question 15

The nurse manager identified that the census was higher than anticipated and the client acuity level was also high; however, fewer nursing hours are paid. This variance is an example of which budgetary variance?

Accepted Answer

1. Efficiency variance is a reflection of the difference between budgeted and actual nursing care hours provided.
2. Nonsalary expenditure variance is a deviation from the budget as a result of changes in client volume, supply quantities, or prices paid.
3. Rate variance is the difference between budgeted and actual hourly rates paid.
4. Volume variances are the differences in the budget as a result of increases or decreases in patient volume.

Question 16

The unit employs 35 FTEs (full-time equivalents) based on an 8-hour shift. The average benefits for these FTEs are 12 vacation days, 10 holidays, 6 sick days, and 4 personal days. Based on these figures, the FTE required per employee to replace benefit time is ________ FTE. Round to the nearest hundredth FTE.

Accepted Answer

The answer of The unit employs 35 FTEs (full-time equivalents)...

Question 17

The nurse has received a commendable progress evaluation and will receive a 3% merit raise. The base salary for an RN is $48,000. Based on this information, the new projected base salary for this RN will be $________.

Accepted Answer

The answer of The nurse has received a commendable progress...

Question 18

As a member of the budgeting committee, the nurse manager reviews the salaries for file clerks in the accounting department. These salaries should be included in which budget item?

Accepted Answer

1. Fixed costs are costs that will remain the same for the budget period regardless of the activity level of the organization.
2. Variable costs depend on and change in direct proportion to client volume and acuity.
3. Indirect costs are expenditures that are necessary but do not affect client care directly.
4. Direct costs are expenses that directly affect client care such as nursing personnel who provide hands-on client care.

Question 19

The nurse manager's goal is to adequately staff the unit and use minimal supplementary staff. The manager has added the cost of this supplementary staff to the unit's operating budget. A colleague informs the manager it should have been added to which budget?

Accepted Answer

1. The personnel budget projects the salary costs that will be paid and charged to the cost center in the budget period.
2. The operating budget is the organization's statement of expected revenues and expenses for the coming year.
3. The revenue budget represents the patient care income expected for the budget period.
4. Because the salary cost of supplementary staff is an unknown, the costs are variable, not fixed.

Question 20

A nurse recruiter is developing a handout to take to nursing schools in hopes of recruiting graduating seniors. The salary for a newly hired nurse is $18.15 per hour with shift differential of 20 percent for working the 7:00 p.m. to 7:00 a.m. shift. The salary for those who would like to work this shift would be $________ per hour.

Accepted Answer

The answer of A nurse recruiter is developing a handout...

Quiz 15: Budgeting and Managing Fiscal Resources