1) The Executive Summary should tell the entire story of the business plan in a
compelling manner. It is recommended that it not be longer than four to six pages.
2) A for-profit or proprietary company may be able to retain the excess of revenues over
expenses (the operating profits) as a source of capital.
3) Foundation transactions should always be included in the operating budget.
4) Managerial accounting is prospective as well as retrospective.
5) A typical example of variable cost is rent expense.
6) Health maintenance organizations (HMOs) and preferred provider organizations
(PPOs) are both revenue sources for many health care providers.
7) One example of borrowing from investors – assuming the organization is big enough
and has the proper legal structure to do so – is that of selling certificates of deposit.
8) The contribution margin is computed by subtracting variable cost from net revenues.
9) Quartiles represent a distribution into four classes, each of which contains twenty
percent of the whole.
10) The Units of Service or Units of Production (UOP) depreciation method is one of
several accelerated book depreciation methods.
11) In the Medicare EHR Incentive program, the maximum amount an eligible
physician can receive from the program increases year by year.
12) The purpose of an organization chart is to indicate how responsibility is assigned to
managers and to certain outside third parties.
13) Building a budget means making a series of assumptions. Thus the budget-building
process should end with a review of strategy and objectives.
14) Two employees each working half-time for one year would be the same as one full
time equivalent (FTE) employee.
15) 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.
16) The expected cash value of an asset at the end of its useful life may be known as:
A. Residual value
B. Salvage value
C. Scrap value
D. All of the above
E. None of the above
17) Jeremy, the controller for a hospice, must commence a benchmarking project.
Jeremy decides he needs to look outside his organization in order to find best levels of
performance for measurement purposes. Is this approach acceptable for benchmarking
purposes?
A. Yes
B. No
C. Not applicable
18) The Acme Medical Equipment Company has used the Last-In First-Out (LIFO)
inventory method for the fifteen years they have existed. Acmes operation has grown
substantially, and the CEO believes that the company should now use the First-In
First-Out (FIFO) inventory method for this coming year-end. Would this action meet
the requirements for consistency?
A. Yes
B. No
C. Not applicable
D. Dont know
19) A perpetual inventory system:
A. Requires a specific identification method for each inventory item
B. Often uses bar coding
C. Is most likely to be found in the pharmacy department of a hospital
D. All of the above
E. None of the above
20) 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
21) The HITECH initiative is also important to understand because:
A. Better understanding means better management decisions
B. A managers part of the process makes more sense when possessing the underlying
knowledge about this complex initiative
C. A manager may be involved with its issues for years, since its implementation
extends over such a long time period
D. A & B
E. A & C
F. B & C
G. All of the above
H. None of the above
22) Assets are:
A. What the organization owns and/or controls
B. What the organization owes
C. Economic resources with expected future benefits
D. Economic obligations
E. A & C
F. A & D
G. B & D
H. None of the above
23) Objectives of the budgeting process should include the provision of a:
A. Basis for evaluating financial performance in accordance with healthcare industry
standards and policies
B. Basis for evaluation financial performance in accordance with the organizations own
standards, policies and plans
C. Both of the above
D. Neither of the above
24) Which variance is sometimes known as the rate variance?
A. Volume variance
B. Quantity variance
C. Price variance
D. None of the above
25) An equipment lease that is not treated as a purchase because it does not meet all the
purchase criteria is then treated as a rental. Rental lease payments are recorded as:
A. an asset
B. an operating expense
C. neither of the above
26) James is preparing a comparative industry report for his boss, who is the Eastern
Health System CFO. The report is overdue, so James is in a hurry. One section of the
report deals with the price of emergency services used by U.S. citizens when outside the
borders of the U.S. James has gathered this information for emergency services
obtained in Canada, but the data is stated in Canadian dollars. James has also gathered
the equivalent information for emergency services obtained in Mexico, but this data is
stated in Mexican pesos. He converts the Canadian dollars to U.S. dollars using an
exchange rate from the previous Monday, or eight days ago. He then converts the pesos
to U.S. dollars using an exchange rate from yesterday, or one day ago. Does this section
of James report contain comparable information?
A. Yes
B. No
C. Not applicable
27) Payroll taxes withheld are:
A. A liability
B. An asset
C. Due to be paid to the government
D. A & C
E. B & C
28) 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
29) The stage 1 criteria for meaningful use focus upon how many of the following
items:
A. Capture health information electronically in a standardized format
B. Provide patient access to self-management tools
C. Use that information in tracking key clinical conditions
D. A & B
E. A & C
F. B & C
G. All of the above
30) If operating income is $500,000 and total operating revenues are $10,000,000, the
correct operating margin is:
A. 5%
B. 20%
C. 2%
D. 50%
31) When creating a report to communicate financial information, the manager should:
A. Organize the body of the report in a logical flow
B. Place extensive detail in the body of the report
C. Place the executive summary in the appendix
D. A & B
E. A & C
F. B & C
G. All of the above
32) In one example within the text, three hospitals general services expenses are
compared, (all for the same year). The laundry line items dollar amounts are $80,000,
$300,000 and $90,000 respectively. However, when the dollars are converted to
percentages, each of these amounts is ten percent of the total expense for the particular
hospital. This type of comparative analysis is known as:
A. Trend analysis
B. Common sizing
C. Either of the above
D. Neither of the above
33) The healthcare industry is primarily a:
A. Manufacturing industry
B. Service industry
C. Electronic information industry
D. Managed care industry
E. None of the above
34) When is the last year to receive a Medicaid EHR incentive payment?
A. 2014
B. 2015
C. 2016
D. 2021
E. None of the above
35) The purpose of the organization is explained by the:
A. Mission statement
B. Vision statement
C. Organizational values statement
36) Expenses in their broadest sense are:
A. both expired and unexpired costs
B. expired costs consumed while carrying on business
C. neither of the above
37) If total operating revenues are $20,000 and the operating margin is 10%, what is the
amount of operating income?
A. $200
B. $1,000
C. $2,000
D. None of the above
38) Hillwood Clinic has borrowed $90,000 from the bank with the following terms:
$20,000 of the this amount to be paid in Year 1, $30,000 to be paid in Year 2, and
$40,000 to be paid in Year 3 . Time continues to move on, and Hillwood has met the
terms of the note in both Year 1 and Year 2 . Therefore at the beginning of Year 3 the
remaining portion of the loan is now classified as follows:
A. $70,000 long-term note payable
B. $70,000 short-term note payable plus zero long-term note payable
C. $40,000 long-term note payable
D. None of the above
39) Regarding the stages of meaningful use, what following statements are correct?
A. The HITECH initiative programs are supposed to advance in three stages that are
sequential
B. The HITECH initiative programs are supposed to advance in three stages that allow
automatic advancement
C. Each stage must be completed before progressing to the next stage
D. A & C
E. B & C
F. None of the above
40) As can be seen in the chapters text and accompanying table, on a typical
amortization schedule with a fixed payment amount, the interest expense becomes less
on each payment and the prinicipal increases on each payment. Conceptually speaking,
why is this?
A. Because each decreasing principal amount means less interest is due
B. Because more of the fixed payment amount can be applied to prinicipal if there is
less interest due
C. Because the fixed amount will not vary in total
D. All of the above
E. None of the above
41) When calculating the comparative present value cost of owning versus cost of
leasing, the present value answers for each year are determined by:
A. Multiplying the present value factor times net cash flow
B. Multiplying net cash flow times the present value factor
C. Either of the above
D. Neither of the above
42) The cumulative inflation factor helps to find the time value of money.
A. Correct
B. Not correct
C. Not applicable
43) The balance sheet reflects a record of:
A. what an organization owns, what it owes and what it is worth
B. a record of transactions over a period of time
C. neither of the above
44) If a balance sheet contains the terms capital stock and retained earnings, then we
can deduce that the organization is a for-profit:
A. Sole proprietor
B. Partnership
C. Corporation
D. None of the above
45) Revenues can be received in the form of:
A. Cash
B. Credit
C. Either cash or credit
D. None of the above
46) FIFO inventory assumptions:
Beginning inventory of 10 units @$5 = $50
Purchases month #1 of 10 units @$10 = $100
Purchases month #2 of 10 units @$15 = $150
Cost of goods available for sale (subtotal) = $300
Less ending inventory of 10 units
Equals cost of goods sold (also known as cost of sales)
Under the FIFO inventory method, what is the cost of goods sold or cost of sales?
A $150
B $250
C $200
D None of the above
47) A corporation will generally report two types of equity accounts: “Capital Stock”
and “__________”.
48) Dr. Larry Brown (Dr. Smith’s cousin) is a partner in a physician practice
partnership. The partnership owes $400,000 in debt and has $600,000 in partner’s
equity. Thus the partnership capital structure, or debt-equity relationship, would be
__________.
49) Telephone expense for nine months on Joe’s departmental expense report amounts
to $1,800. Joe must now annualize expenses for a twelve-month period. Joe’s
annualized twelve-month telephone expense would amount to $__________.
50) Subsidiary reports are __________ to the four major reports.
51) For a pharmacy division, within the sequential steps to compute estimated ending
drug inventory, what percent of net sales represents cost of goods (drugs) sold if net
sales are $1,000,000 and dollar amount of cost of goods (drugs) sold is $700,000?
52) Three recognized types of ICD-10 adoption costs include system changes, training
costs and __________ losses.
53) Inventory turnover is calculated as follows: Cost of Goods Sold (or Cost of Sales)
divided by __________ Inventory equals Inventory Turnover.
54) In the case of non-profit organizations, does the outflow of expenses increase or
decrease fund balance?
55) A cost center is one form of __________ center.