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263 Exam 2 > Budgeting > Flashcards

Budgeting Flashcards

1
Q

A document that details how financial resources will be allocated to ensure that the organization is able to conduct its daily business and achieve strategic goals.

A

Budget

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2
Q

4 Basic functions that budgets perform:

A

1- planning
2- Coordinating and communicating
3- monitoring progress
4- Evaluating performance

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3
Q

In this phase managers decide on goals to achieve during specified period, identify resources, predict revenues & expenses based on goals & assumptions.

A

Planning

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4
Q

During the planning phase, what are they doing?

A

-Setting goals
-predict revenues & expenses
-identify resources needed to achieve goals
(These create a budget assumption)

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5
Q

How long does a budget typically last.

A

1 year at a time.

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6
Q

Why should nurses be part of budget planning?

A
  • help to determine resource allocation
  • learn to be more cost conscious.
  • appreciate how units should function
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7
Q

Why is coordination & communication important when planning a budget?

A
  • many different groups gather to discuss resources

- gives opportunity to resolve issues & concerns

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8
Q

The function that the nurse manager is involved in daily and is the most vital function of a budget.
Compares actual performance against expected budget.

A

Monitoring progress

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9
Q

Monitoring progress measure…

A

the effectiveness of a budget.

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10
Q

Ongoing monitoring allows…

A

timely corrective action - if needed.

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11
Q

The difference between planned budget and actual results.

A

Variance

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12
Q

When is a variance favorable?

A

When results are better than expected.

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13
Q

When is a variance unfavorable

A

when results are worse than expected.

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14
Q

The process by which deviations from budgeted amounts are examined…

A

Variance analysis

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15
Q

Managers may be evaluated based on their budget performance… what may they receive.

A

A bonus.

  • Job retention
  • Career advancement
  • salary decisions
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16
Q

Three types of budgets:

A
  • Operating Budget
  • Labor Budget
  • Capital Budget
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17
Q

Allocates funds for daily expenses, such as salaries, utilities, repairs, maintenance, & pt. care supplies.

A

Operating Budget

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18
Q

A subset of operating budget; allocates funds for salaries, overtime, benefits, & staff development & training.

A

Labor Budget

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19
Q

Allocates funds for construction projects, long-life medical equipment (cardiac monitors, defibrillators, computers).

A

Capital Budget

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20
Q

4 Operational budget Expenses that are necessary:

A
  • Salaries
  • Utilities
  • Equipment Maintenance
  • Pt. care supplies
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21
Q

Revenues in the operational budget (4)

A
  • Health insurance
  • Medicare & Medicaid
  • Pt. out of pocket payments
  • Grants, other Govt. programs (teaching hospitals)
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22
Q

Purpose of Labor budget.

A
  • detailed documentation of
  • salaries
  • wages
  • benefits
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23
Q

Factors that affect personnel budget:

A
  • salary rates
  • overtime
  • benefits
  • staff development & training
  • employee turnover
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24
Q

What is the largest expense in an operational budget?

A

Usually the labor budget.

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25
Q

A measurement of number of nursing hours worked in comparison with amount of patient care provided.

A

Productivity metric

26
Q

Organizations expect the Nurse manager to control..

A

The number of worked hours vs. actual salary expense.

27
Q

Why is the capital budget usually developed separately from the operating budget?

A

-they usually require multiple years to pay out.

28
Q

Main requirements for a purchase to be considered part of the capital budget?

A
  • useful life expectancy of more than a year

- costs more than a specific dollar amount

29
Q

Capital purchases are often considered as…

A

Investments

30
Q

Planning capital budgets will _______ nurse managers _________ skills.

A

Test

long-range planning skills

31
Q

Which capital expenditures should be addressed with urgency?

A

those that ensure patient safety

32
Q

Two Budgeting methods

A

1- Incremental Budgeting

2- Zero Based Budgeting

33
Q

Most commonly used budgeting method.
simple & easy to apply.
Forward trend of CURRENT budget with adjustments for future growth.

A

Incremental Budgeting

34
Q

Incremental budgeting’s primary strengths (2)

A

simplicity

-compatibility w/ most organizations

35
Q

How is incremental budgeting simple

A

-takes current revenues & expenses adjusts for inflation or growth (OR decline) and applies it.

36
Q

Weakness of incremental budgeting?

A
  • doesn’t address past mistakes in the budget

- doesn’t take into account significant changes in departments (problematic when unit not run well)

37
Q

Building a budget as if it is being prepared for the first time.

A

Zero-based budgeting

38
Q

Strengths of a Zero-based budget

A
  • accurate
  • doesn’t build on previous incorrect assumptions
  • process engenders buy-in by personnel.
  • creative thinking
39
Q

Weaknesses of a zero-based budget

A
  • Time consuming (2-3 months)
  • resource intensive
  • May be too complex
  • requires common frame of reference of all participants.
40
Q

When does the development of a budget for a new fiscal year occur.

A

a few months ahead of start of fiscal year.

Must be developed and approved before effected.

41
Q

Health care organizations usually have a __________for budget development.

A

defined procedure in place

42
Q

What is the top-down approach

A

Upper management sets budget goals & imposes the goals on the rest of the organization.

43
Q

What is the participatory approach

A

the people responsible for achieving the budget goals are included in goal setting.

44
Q

What is the iterative approach

A

Combination of top-down & participatory.
Upper management sets strategic goals, unit leaders develop operating budgets that work in conjunction w/ strategic goals.

45
Q

Unit of service

A

-provides the basis for allocating expenses & revenues.

EG: patient days, patient visits…

46
Q

Steps in the budget development process (6)

A

1- Review plan & identify goals & objectives
2- Set budget assumptions
3- Gather info about past results & combine with budget assumptions to set expectations for future
4- Predict the units of service to be provided during budget period
5- Project expected revenues based on units of service
6- project expenses on basis of units of service.

47
Q

What do budget assumptions address?

A

issues that affect the future performance of organization.
EX: supply pricing increase/decrease, salary range that ensures employee retention, health insurance costs, competitor pricing, patient census increase/decrease?

48
Q

The process by which deviations from budgeted amounts are examined by comparison of actual performance results vs. expected or budgeted performance.

A

Variance analysis

49
Q

How are variances evaluated?

A

Quantitative or Qualitative

50
Q

This analysis focuses on numeric variances to the budget.

Ex: are you over/under budget for labor?

A

Quantitative

51
Q

Analysis of budget variances focused on reconciling underlying budget assumptions with current conditions.
Ex: patient acuity rises higher than projected, labor usage is higher than allowed in budget.

A

Qualitative

52
Q

When is labor budget variances presented?

A

Pay period basis.

53
Q

Overall budget variances are presented when?

A

Monthly, quarterly or annually.

54
Q

Overall budget variance compare the following:

A
  • current performance against budget

- current performance against previous year’s performance

55
Q

Primary types of costs ((6)

A
  • Unit of service
  • Direct cost
  • Indirect cost
  • Full cost
  • Fixed Cost
  • Variable cost
56
Q

Basic measure of product or service being produced.

A

unit of service

57
Q

costs that can be traced directly to production of unit of service

A

direct cost

58
Q

costs that are incurred as a result of organizations operating expenses but are not r/t providing the unit of service

A

indirect cost

59
Q

the total of all cost associated with a unit of service. Includes direct and indirect costs.

A

Full cost

60
Q

Costs that do not change as the unit of service volume changes.
ex: administrative salaries

A

Fixed costs

61
Q

Costs that vary directly with changes in the volume of units of service

A

variable cost.

263 Exam 2 (5 decks)

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