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Q:
ms. brown, the cfo of southern general hospital, argues that benchmarking can measure both services and activities of an ongoing project. mr. oconnell, a prominent hospital board member, disagrees. he argues that the hospital provides services and thus only services should be considered in a benchmarking project. from a conceptual viewpoint, who is correct? a. mr. oconnell, the board member b. ms. brown, the cfo c. neither of the above
Q:
benchmarks are typically used to measure: a. performance gaps b. salary adjustments c. capital improvements d. all of the above
Q:
when benchmarking measures against the best levels of performance, these best levels may be found: a. inside the organization b. outside the organization c. both of the above d. neither of the above
Q:
the term case mix adjustment may refer to: a. the acuity level of a patient b. the level of resources required to provide care for a patient with a particular acuity level c. data processing statistics d. a & b e. a & c f. all of the above
Q:
an organization that has adopted tqi (total quality improvement) will typically have: a. fewer performance measures b. a wider variety of performance measures c. not applicable
Q:
the average cost of inventory derived by using the weighted average inventory method is in fact an estimate. the weighted average cost is determined by: a. dividing the cost of goods available for sale by the number of units available b. dividing the number of units available by the cost of goods available for sale c. either of the above d. neither of the above
Q:
when making an estimate, indirect costs that are not recognized within the estimate will typically result in: a. a positive impact on operations b. a negative impact on operations c. either of the above d. neither of the above
Q:
estimates may be relied upon as inputs to certain reports. however, such estimates would not be appropriate when preparing: a. internal financial statements b. budgets c. audited financial statements d. forecasts
Q:
it is commonly accepted that using an estimate provides a quick answer. it is also recognized that the answer provided by an estimate may be: a. more accurate b. less accurate c. about the same as actual measurement
Q:
jack, the general manager of a physician practice, decides to use estimates for several items when preparing the monthly financial statements for the doctors. his decision is considered to be: a. a correct use of estimates b. a common use of estimates c. an incorrect use of estimates d. a & b e. none of the above
Q:
to estimate implies a judgment that takes the place of: a. counting b. testing out c. actual measuring d. all of the above e. none of the above
Q:
parametric analysis is one type of benchmarking analysis. in parametric analysis: a. the characteristics or attributes of similar services are examined b. the process that serves as a standard for comparison is examined c. both of the above d. neither of the above
Q:
estimates may be of: a. amount b. size c. value d. all of the above e. a and b only f. b and c only
Q:
methods of benchmarking include: a. analyzing processes within your own organization that are worthwhile to replicate b. examining the process of noncompetitors with a world-class reputation c. studying the methods and results of your prime competitors d. all of the above e. none of the above
Q:
benchmarking measures products, services and activities against the best levels of performance. it is: a. a single-occasion process b. a continuous process c. neither of the above
Q:
using the same assumptions as in the preceding question, complete the contribution margin income statement. thus the operating income amounts to:
Q:
using the following assumptions, what amount is the contribution margin? assumptions: revenue = $5,000; fixed costs = $1,200; variable costs = $3,000.
Q:
the contribution margin is the difference between revenue and __________ costs.
Q:
volume variance is also known as __________ variance.
Q:
flexible budgeting variance provides a method to get more __________ about the composition of departmental expense.
Q:
the use or quantity variance is a type of flexible budget variance. it is also known as the efficiency variance.
Q:
volume variance is calculated as the difference between the total budgeted cost based on a predetermined, expected workload level and the amount that would have been budgeted had the actual workload been known in advance.
Q:
two-variance analysis compares volume variance to budgeted costs.
Q:
spending or price variance is calculated as the difference between actual quantity of inputs used per unit of output multiplied by the actual output level and the budgeted unit price.
Q:
a variance is the difference between standard and actual prices and quantities.
Q:
assume the following: (1) desired target operating income $20,000; unit price for sales $500; variable costs per unit $300; total fixed cost $10,000. (2) we have applied the formula to calculate the contribution margin method of determining target operating income, and have arrived at a numerator amount of $30,000 (20,000 plus 10,000) and a denominator amount of $200 (500 minus 300). (3) these figures yield an answer of 150 units (30,000 divided by 200). what is the required revenue to achieve the target operating income of $20,000? a. $30,000 b. $45,000 c. $75,000 d. $150,000 e. none of the above
Q:
to calculate a contribution margin per unit, assume the following: variable cost per unit $60; total fixed cost $2,000; unit price for sales $100 and total sales $8,000. the contribution margin per unit amounts to: a. $20 b. $40 c. $60 d. $80 e. none of the above
Q:
the denominator of the formula to calculate the contribution margin method of determining target operating income consists of the contribution margin per unit. what is the correct numerator in the formula? a. fixed costs plus target operating income b. target operating income c. fixed costs plus variable costs d. none of the above
Q:
the target operating income computation using the contribution margin method determines how many units must be sold in order to yield a particular: a. gross revenue b. operating income c. net revenue d. none of the above
Q:
the format of a contribution income statement is described as follows: a. revenue less fixed costs equals contribution margin less variable and fixed costs equals operating income b. revenue less variable costs less fixed costs equals operating income c. revenue less variable costs equals contribution margin less fixed costs equals operating income d. none of the above
Q:
the contribution income statement: a. specifically identifies the contribution margin within the net worth format b. specifically identifies the contribution margin within the income statement format c. shows how the remaining difference is available for fixed costs and operating income d. a & b e. b & c f. all of the above
Q:
the contribution margin is the difference between: a. revenue and total costs b. revenue and variable costs c. revenue and fixed costs d. none of the above
Q:
multiple levels of forecasted revenue can be illustrated on a chart or graph, with: a. revenue in dollars on the vertical axis and time periods on the horizontal axis b. time periods on the vertical axis and revenue in dollars on the horizontal axis c. revenue in dollars on the vertical axis and time expressed as percentages on the horizontal axis
Q:
sensitivity analysis is often used when forecasting revenue. when revenue is forecasted in multiple levels, the most common forecasts are in: a. two levels: best case versus worst case b. three levels: basic plus best case and worst case c. four levels: desired, basic, best case, worst case d. none of the above
Q:
in the static budget variance analysis illustrated example for an open imaging center, the amounts are shown as either favorable (f) or unfavorable (u) for: a. revenue b. expense c. operating income d. number of procedures performed e. a & b only f. a, b & c only g. all of the above
Q:
referring once again to the infusion center variance analysis illustrated example, note that the flexible budget variance is $11,200 (unfavorable), the sales volume variance is $12,000 (favorable), the static planning budget is $20,000, and the actual amounts at actual prices is $20,800. with what you have learned about variance analysis, what is the proof total amount for this analysis? a. $8,800 b. $8,000 c. $800 d. none of the above
Q:
using the information provided in the preceding question, is the infusion center variance analysis example a: a. two-variance analysis b. three-variance analysis c. five-variance analysis d. none of the above
Q:
in the illustrated example of variance analysis for an infusion center, the flexible variance analysis is divided into a flexible budget variance of $11,200 (unfavorable) and a sales volume variance of $12,000 (favorable). which of these variances relates to the number of procedures performed? a. flexible budget variance b. static budget variance c. sales volume variance d. none of the above
Q:
if budgeted costs are computed as standard hours for actual production and as actual hours for actual production, is the resulting variance analysis a: a. two-variance analysis b. three-variance analysis c. five-variance analysis d. all of the above
Q:
in variance analysis, the actual quantities of materials, labor and certain types of overhead used represent: a. outputs b. inputs c. differential analysis d. none of the above
Q:
which variance is sometimes known as the rate variance? a. volume variance b. quantity variance c. price variance d. none of the above
Q:
which variance is sometimes known as the activity variance? a. volume variance b. quantity variance c. price variance d. none of the above
Q:
which variance is sometimes known as the efficiency variance? a. volume variance b. quantity variance c. price variance d. none of the above
Q:
in its broadest sense, variance analysis analyzes the difference between: a. actual and budgeted prices and quantities b. actual and standard prices and quantities c. budgeted and standard prices and quantities d. all of the above e. none of the above
Q:
flexible budgeting variance analysis: a. was conceived by industry b. was subsequently discovered by health care c. provides a method to get more information about acquiring departmental equipment d. a & b e. a & c
Q:
the following calculation should be performed to obtain a total variance proof total: a. budgeted cost less applied cost b. actual cost less applied cost c. actual cost less budgeted cost d. none of the above
Q:
when performing variance analysis, it is common practice to also obtain a proof total. the applicable proof total is: a. computed differently for two-variance analysis versus three-variance analysis b. computed the same for two-variance analysis versus three-variance analysis c. may vary under different circumstances d. not applicable
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