Nursing Leadership and Management

2nd Edition Kelly Test Bank

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Chapter 10-BUDGET CONCEPTS FOR CLIENT CARE

MULTIPLE CHOICE

1. Which type of budget accounts for both revenue and expenditures associated with the day-to-day
functions of a department or organization?
a. an operating budget
b. a capital budget
c. a construction budget
d. an accounting budget
ANS: A
RAT: An operational budget is a financial tool that outlines the expected revenue and expenses for a
particular unit, department, or organization over a specified period.

PTS: 1 REF: p. 208 BLM: Remembering

2. Which of these terms refers to a budget that indicates designated funds for the purchase of major new
equipment?
a. unit budget
b. construction budget
c. capital budget
d. equipment budget
ANS: C
RAT: The purchase of major new or replacement equipment is covered within the capital budget.
Health care agencies need to budget for capital costs in order to keep up with technological advances
in patient care, to replace antiquated equipment that is no longer cost-efficient to operate and repair, or
to replace equipment that no longer meets regulatory standards.

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3. What type of budget includes building permits, materials, and labour costs?
a. capital budget
b. construction budget
c. balanced budget
d. operating budget
ANS: B
RAT: Building permits, construction materials, and labour costs are items that must be planned for
when developing a construction budget. Construction budgets are separate from other types of budgets
and are developed when major renovations or new structures are planned.

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4. Which of the following are considerations in determining a capital expense?
a. effectiveness and equipment life expectancy
b. cost and clinical application
c. cost and equipment life expectancy
d. number of clients to be served and cost
ANS: C
RAT: Cost and life expectancy, or how long the equipment is expected to perform over time, are the
main considerations in deciding what will be included in the capital budget. Generally, a capital item
costs over $1,000 and is expected to last five years or longer.

PTS: 1 REF: p. 209 BLM: Understanding

5. Which of these business aspects refers to the recording and reporting of financial transactions and
data?
a. operating plans
b. accounting
c. financial indicators
d. budget development
ANS: B
RAT: The processes of accounting involve recording and reporting financial transactions and related
data in order to manage and control the operating budget. Accounting also helps to identify problems
in financial performance.

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6. Which of these documentation tools would you use to provide a snapshot of information and activity at
a specific time?
a. strategic plan
b. variance report
c. balanced budget
d. balanced scorecard
ANS: D
RAT: A balanced scorecard is a documentation tool that provides a snapshot of information about
performance and activity at a particular time. Balanced scorecards may be based on an organization’s
finances, customer satisfaction and services, operating efficiency, or learning and growth.

PTS: 1 REF: p. 209 BLM: Applying

7. What is the usual period for which an operating budget is developed?

a. 1 year
b. 3 years
c. 5 years
d. 10 years
ANS: A
RAT: A budget is typically developed for a 12-month period. The yearly cycle will be based on a
fiscal year that is specified by the province or territory, often April 1 to March 31. Shorter or longer
term budgets may be used by some agencies, depending on their organization’s planning process.

PTS: 1 REF: p. 212 BLM: Understanding

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 8. Which kind of budget takes into account demographics, regulations, and strategic plans?
a. a capital budget
b. an annual budget
c. a balanced budget
d. a project budget
ANS: B
RAT: Key elements that will influence the preparation of an annual budget are the demographics of
the client population, regulatory influences, and the organization’s strategic plans. Organizations may
devote six months or more to developing their annual budget. During this time they gather key
information that is fundamental to their operation.

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9. What is the title of the body that accredits health facilities in Canada?
a. Accreditation Canada (AC)
b. Health Services Standards Organization (HSSO)
c. Canadian Accreditation Service (CSA)
d. Canadian Council on Health Services Accreditation (CCHSA)
ANS: A
RAT: Accreditation Canada assesses health facilities across Canada to determine if they meet accepted
standards. Based on their assessment, the AC can make recommendations that will impact on capital or
operating budget planning.

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10. In relation to budget preparation, which of these terms refers to the units or subsections within a
facility?
a. financial unit
b. cost sections
c. compartments
d. cost centres
ANS: D
RAT: For budget purposes, the units or subsections within an agency are commonly called cost
centres. Each cost centre defines its own scope of service within the larger facility The examinations of
individual cost centres helps to track financial data and relates it to service details such as type of
clients, treatments and procedures offered, and hours of operation

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11. Which of these factors typically serves as the baseline for preparation of an operating budget?
a. government funding
b. past performance
c. the strategic plan
d. increased demand
ANS: B
RAT: Past performance or history is used as a baseline that helps in understanding and predicting
future performance and budgetary needs. Historical data provide a perspective on how a department
has changed over time in terms of demand and capacity.

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12. Which of these categories includes investments and billable client services?
a. reimbursement
b. expenditures
c. revenue
d. line item
ANS: C
RAT: Revenue is income that may come from a variety of sources, such as client billings and
investments, and other sources.

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13. In terms of the budget, which category would include a donation coming to an organization?
a. profit
b. revenue
c. dashboard
d. variance
ANS: B
RAT: Revenue is income generated through a variety of means—donations, billable patient services,
and investments.

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14. What are the resources used to deliver services collectively referred to as?
a. expenditures
b. labour costs
c. supplies
d. payments
ANS: A
RAT: Expenditures are all the resources needed by the organization in order to deliver services.
Expenditures usually include, at minimum, labour costs, supplies, equipment, and utilities.
Understanding expenditures is necessary to help ensure that budgets are adequate to cover all line item
expenses for service delivery.

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15. What is the process that details the cost of every supply item and the frequency of use?
a. accounting
b. zero-based budgeting
c. operating budget
d. capital budget
ANS: B
RAT: Zero-based budgeting is a process used to drill down into costs associated by detailing every
supply item and the quantity of times it is typically used.

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16. What percent of operating costs is made up of salaries and benefits?

a. 90 percent
b. 80 percent
c. 50 percent
d. 30 percent
ANS: B
RAT: Salaries and benefits account for approximately 80 percent of operating costs in most health care
facilities. Because human resources make up such a significant expense it is important to have a
system for calculating the amount of time that all staff members spend in providing service.

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17. What is the term for the number and type of staff needed for a procedure or to care for a fixed number
of clients?
a. staffing model
b. direct patient preparation
c. pre-procedure care
d. post-procedure care
ANS: A
RAT: A staffing model outlines the number and type of staff required for a procedure or to provide
care for a predetermined number of patients. Staffing models are based on a primary statistic such as
procedures or patients and are helpful in analyzing productivity.

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18. Once you have prepared your program or departmental budget, who will have the responsibility for a
final decision regarding acceptance of the budget?
a. department managers
b. VP Nursing
c. finance and operations senior management
d. Minister of Health
ANS: C
RAT: Once developed, budgets are submitted for review and approval. In most facilities, senior
management representing finance and operations are responsible for reviewing and approving
departmental or unit budgets and for ensuring that they work with the overall organizational budget.

PTS: 1 REF: p. 217 BLM: Applying

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19. Who is responsible for controlling a budget?
a. Chief Nursing Officer
b. finance officer
c. accountants
d. unit or department manager
ANS: D
RAT: Control of a unit or department budget is one of the main responsibilities of the unit or
department manager. They should be monitoring the budget on a monthly basis to ensure that costs
and revenue are balanced and that productivity and standards are maintained.

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20. Which of these terms refers to a report that documents and explains when a unit deviates from the
approved budget?
a. monthly report
b. budget report
c. variance report
d. cost centre report
ANS: C
RAT: A variance is the difference between what was budgeted and the actual result. Managers may be
required to complete a variance report when changes occur that impact on the unit’s budget, such as
increased or decreased patient volumes or increased costs for supplies. The variance report helps to
identify which categories in the budget are out of line and the corrective action that is needed.
Variance reports may be posted so all staff members are made aware and can participate in the
required actions.

PTS: 1 REF: p. 218 BLM: Remembering

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