Healthcare Finance Final Exam
Managerial accounting - correct answer ✔✔how to take information from financial accounting and
managerial finance and decide what decisions to make
Cost classifications - correct answer ✔✔1. fixed
2. variable
3. semi-fixed
4. relevant range
Fixed costs - correct answer ✔✔costs that are not related to the volume of services delivered
-example: facilities costs
Semi-fixed costs - correct answer ✔✔costs that are fixed at two or more values within the relevant range
Variable costs - correct answer ✔✔costs that are directly related to volume
-example: the costs of clinincal supplies ( rubber gloves, tongue depressors, hypodermics) used by the
clinic
Total costs - correct answer ✔✔made up of fixed costs and total variable costs
Cost-voulme-profit (CVP)anaylsis - correct answer ✔✔a technique applied to an organization's cost and
revenue structure that analyzes the effect of volume changes on costs and profits
Why CVP anaylsis is used to managers? - correct answer ✔✔alllows managers to examine the effects of
alternative assumptions regarding costs, volume, and prices. Useful as managers evaluate future courses
of action regarding pricing and the introduction of new services
, Contribution Margin - correct answer ✔✔the difference between per-unit revenue and per-unit costs
(varaible cost rate) and hence the amount that each unit of output contributes to cover fixed costs and
ultimately flows to profit
-per unit revenue- variable cost rate
Economic meaning of contribution margin - correct answer ✔✔the dollar amount per visit available to
cover an organization's fixed costs. Only after fixed costs are fully covered does the contribution margin
begin to contribute to profit
Volume break-even equation - correct answer ✔✔Total revenues- total variable costs- fixed costs= profit
Operating leverage - correct answer ✔✔the proportion of a business's total costs that are fixed costs
How operating leverage is measured? - correct answer ✔✔the degree of operating leverage, which is a
measure of a business's operating leverage defined as total contribution margin divided by earnings
before interest and taxes (EBIT)
Provider incentives differ when providers move from a fee-for-service to a capitated environment -
correct answer ✔✔-capitated environment incentives ensure quality
-fee-for-services incentives ensure quantity
Differences between financial and managerial accounting - correct answer ✔✔-managerial deals with
decisions in the future
-financial deals with decisions in the past
-financial can be thought of as reporting work
-managerial can be thought of as decisions work
cost - correct answer ✔✔a resoruces used associated with providing or supporting a specific service.
-this is the general rule for healthcare providers since there is no single definition for the term
Two primary ways that costs can be classified are - correct answer ✔✔1. by their relationship to the
volume of services provided
Managerial accounting - correct answer ✔✔how to take information from financial accounting and
managerial finance and decide what decisions to make
Cost classifications - correct answer ✔✔1. fixed
2. variable
3. semi-fixed
4. relevant range
Fixed costs - correct answer ✔✔costs that are not related to the volume of services delivered
-example: facilities costs
Semi-fixed costs - correct answer ✔✔costs that are fixed at two or more values within the relevant range
Variable costs - correct answer ✔✔costs that are directly related to volume
-example: the costs of clinincal supplies ( rubber gloves, tongue depressors, hypodermics) used by the
clinic
Total costs - correct answer ✔✔made up of fixed costs and total variable costs
Cost-voulme-profit (CVP)anaylsis - correct answer ✔✔a technique applied to an organization's cost and
revenue structure that analyzes the effect of volume changes on costs and profits
Why CVP anaylsis is used to managers? - correct answer ✔✔alllows managers to examine the effects of
alternative assumptions regarding costs, volume, and prices. Useful as managers evaluate future courses
of action regarding pricing and the introduction of new services
, Contribution Margin - correct answer ✔✔the difference between per-unit revenue and per-unit costs
(varaible cost rate) and hence the amount that each unit of output contributes to cover fixed costs and
ultimately flows to profit
-per unit revenue- variable cost rate
Economic meaning of contribution margin - correct answer ✔✔the dollar amount per visit available to
cover an organization's fixed costs. Only after fixed costs are fully covered does the contribution margin
begin to contribute to profit
Volume break-even equation - correct answer ✔✔Total revenues- total variable costs- fixed costs= profit
Operating leverage - correct answer ✔✔the proportion of a business's total costs that are fixed costs
How operating leverage is measured? - correct answer ✔✔the degree of operating leverage, which is a
measure of a business's operating leverage defined as total contribution margin divided by earnings
before interest and taxes (EBIT)
Provider incentives differ when providers move from a fee-for-service to a capitated environment -
correct answer ✔✔-capitated environment incentives ensure quality
-fee-for-services incentives ensure quantity
Differences between financial and managerial accounting - correct answer ✔✔-managerial deals with
decisions in the future
-financial deals with decisions in the past
-financial can be thought of as reporting work
-managerial can be thought of as decisions work
cost - correct answer ✔✔a resoruces used associated with providing or supporting a specific service.
-this is the general rule for healthcare providers since there is no single definition for the term
Two primary ways that costs can be classified are - correct answer ✔✔1. by their relationship to the
volume of services provided
