HSMA 4055 CH 6-14 EXAM REVIEW QUESTIONS AND ANSWERS
Which of the following is not part of a business's strategic plan?
Mission statement
Values statement
Goals
Capital budget
Objectives - CORRECT ANSWER✅✅Capital budget
Budgets are used for which of the following?
Planning
Communication
Control
Both a and b
All of the above - CORRECT ANSWER✅✅All of the above
Which of the following statements about budgeting is incorrect?
a. In the conventional approach, the prior budget is used as the starting point.
b. In zero-based budgeting, the prior budget is adopted for the coming year with no changes.
c. All organizations use annual budgets, but most also use quarterly (or more frequent) budgets.
d. Out-year budgets are used more for planning purposes than for control.
e. Bottom-up budgets begin at department level and then are approved by senior management. -
CORRECT ANSWER✅✅b. In zero-based budgeting, the prior budget is adopted for the coming year with
no changes.
In budgeting, which of the following best describes variance?
,a. A measure of the degree of dispersion of a distribution about its mean value
b. The difference between a realized value and a budgeted, or standard, value
c. The percentage decrease in volume that can occur without causing the organization to lose money
d. The difference between operating profit and total profit
e. The difference between total revenues and total costs - CORRECT ANSWER✅✅b. The difference
between a realized value and a budgeted, or standard, value
Which of the following statements about a flexible budget is most correct?
a. A flexible budget uses realized (actual) prices along with all other original (simple) budget
assumptions.
b. A flexible budget uses realized (actual) labor costs along with all other original (simple) budget
assumptions.
c. A flexible budget uses realized (actual) supplies costs along with all other original (simple) budget
assumptions.
d. A flexible budget uses realized (actual) facilities costs along with all other original (simple) budget
assumptions.
e. A flexible budget uses realized (actual) volume along with all other original (simple) budget
assumptions. - CORRECT ANSWER✅✅e. A flexible budget uses realized (actual) volume along with all
other original (simple) budget assumptions.
The following profit information was taken from Eastside Hospital's budget data:
Simple budget: $1,200,000
Flexible budget: $1,000,000
Actual results: $ 500,000
What is the simple profit variance? (Hint: An unfavorable variance is identified by a minus sign.) -
CORRECT ANSWER✅✅-$700,000
The following profit information was taken from Eastside Hospital's budget data:
Simple budget: $1,200,000
Flexible budget: $1,000,000
, Actual results: $ 500,000
What is the flexible profit variance? (Hint: An unfavorable variance is identified by a minus sign.) -
CORRECT ANSWER✅✅-$500,000
Assume that the simple profit variance is -$200,000 while the flexible profit variance is +$200,000.
Which of the following statements about this situation is most correct?
a. When the volume forecast error is accounted for, the business lost money.
b. When the volume forecast error is accounted for, the business broke even.
c. The business actually made a profit of $200,000.
d. The business actually made a profit of $400,000.
e. When the volume forecast error is accounted for, the business made money. - CORRECT
ANSWER✅✅e. When the volume forecast error is accounted for, the business made money.
Which of the following statements represents an organizational objective (as opposed to an
organizational goal)?
a. To increase inpatient volume by 3 percent per year
b. To increase market share
c. To provide high-quality care
d. To maintain a financial condition that permits us to invest in new technology
e. To implement electronic medical records as quickly as possible - CORRECT ANSWER✅✅a. To increase
inpatient volume by 3 percent per year
A hospital outpatient department budgets for 15,000 visits per year. At the end of the year, the hospital
has 12,000 patient visits. When comparing the flexible budget to the simple budget, which of the
following will be true?
a. Total expenses in the flexible budget will be lower than in the simple budget.
b. Total expenses in the flexible budget will be higher than in the simple budget.
c. Total revenues in the flexible budget will be lower than in the simple budget.
Which of the following is not part of a business's strategic plan?
Mission statement
Values statement
Goals
Capital budget
Objectives - CORRECT ANSWER✅✅Capital budget
Budgets are used for which of the following?
Planning
Communication
Control
Both a and b
All of the above - CORRECT ANSWER✅✅All of the above
Which of the following statements about budgeting is incorrect?
a. In the conventional approach, the prior budget is used as the starting point.
b. In zero-based budgeting, the prior budget is adopted for the coming year with no changes.
c. All organizations use annual budgets, but most also use quarterly (or more frequent) budgets.
d. Out-year budgets are used more for planning purposes than for control.
e. Bottom-up budgets begin at department level and then are approved by senior management. -
CORRECT ANSWER✅✅b. In zero-based budgeting, the prior budget is adopted for the coming year with
no changes.
In budgeting, which of the following best describes variance?
,a. A measure of the degree of dispersion of a distribution about its mean value
b. The difference between a realized value and a budgeted, or standard, value
c. The percentage decrease in volume that can occur without causing the organization to lose money
d. The difference between operating profit and total profit
e. The difference between total revenues and total costs - CORRECT ANSWER✅✅b. The difference
between a realized value and a budgeted, or standard, value
Which of the following statements about a flexible budget is most correct?
a. A flexible budget uses realized (actual) prices along with all other original (simple) budget
assumptions.
b. A flexible budget uses realized (actual) labor costs along with all other original (simple) budget
assumptions.
c. A flexible budget uses realized (actual) supplies costs along with all other original (simple) budget
assumptions.
d. A flexible budget uses realized (actual) facilities costs along with all other original (simple) budget
assumptions.
e. A flexible budget uses realized (actual) volume along with all other original (simple) budget
assumptions. - CORRECT ANSWER✅✅e. A flexible budget uses realized (actual) volume along with all
other original (simple) budget assumptions.
The following profit information was taken from Eastside Hospital's budget data:
Simple budget: $1,200,000
Flexible budget: $1,000,000
Actual results: $ 500,000
What is the simple profit variance? (Hint: An unfavorable variance is identified by a minus sign.) -
CORRECT ANSWER✅✅-$700,000
The following profit information was taken from Eastside Hospital's budget data:
Simple budget: $1,200,000
Flexible budget: $1,000,000
, Actual results: $ 500,000
What is the flexible profit variance? (Hint: An unfavorable variance is identified by a minus sign.) -
CORRECT ANSWER✅✅-$500,000
Assume that the simple profit variance is -$200,000 while the flexible profit variance is +$200,000.
Which of the following statements about this situation is most correct?
a. When the volume forecast error is accounted for, the business lost money.
b. When the volume forecast error is accounted for, the business broke even.
c. The business actually made a profit of $200,000.
d. The business actually made a profit of $400,000.
e. When the volume forecast error is accounted for, the business made money. - CORRECT
ANSWER✅✅e. When the volume forecast error is accounted for, the business made money.
Which of the following statements represents an organizational objective (as opposed to an
organizational goal)?
a. To increase inpatient volume by 3 percent per year
b. To increase market share
c. To provide high-quality care
d. To maintain a financial condition that permits us to invest in new technology
e. To implement electronic medical records as quickly as possible - CORRECT ANSWER✅✅a. To increase
inpatient volume by 3 percent per year
A hospital outpatient department budgets for 15,000 visits per year. At the end of the year, the hospital
has 12,000 patient visits. When comparing the flexible budget to the simple budget, which of the
following will be true?
a. Total expenses in the flexible budget will be lower than in the simple budget.
b. Total expenses in the flexible budget will be higher than in the simple budget.
c. Total revenues in the flexible budget will be lower than in the simple budget.
