Grohar-Murray TIF
Chapter 16: Managing Resources: Budget
Learning Objective 1
Identify the purpose of a budget.
1. The nurse supervisor is speaking to the nurse managers regarding the organization’s budget.
Which of the following statements by a nurse manager indicates the need for further education?
1. “I can see how important it is to tie in my unit’s budget with the organization’s
objectives.”
2. “It doesn’t matter when we do the budget. It just needs to be done at some point
within the year.”
3. “Every department has an individual operating budget based on the needs of that
department.”
4. “There is a system in place to ensure that the needs of the organization are met
through policies that apply to every department.”
Learning Objective 2
List the steps in the budgetary process.
2. The hospital administrators are examining the fiscal health of the organization. Which of the
following assessments will most likely lead to a change in the services that are provided by the
hospital?
1. The percentage of childbearing-aged women in the surrounding community has
increased from 34% to 35%.
2. The nurse retention rate has decreased by 5% from 2 years ago.
3. The number of hip replacements that are being performed has increased 30% from 1
year ago.
4. The number of hysterectomies performed at the hospital has decreased by 3% over
the last 3 years.
3. The novice nurse manager is questioning the experienced nurse manager regarding budgeting
activities. Which of the following statements by the novice nurse manager indicates that further
education is required?
1. “I will put the unit’s new bariatric beds on the unit’s capital budget.”
2. “My operating budget should be used to buy the supplies that we use daily for the
clients.”
3. “I can expect to perform budgeting activities on a set schedule.”
4. “The new copier and fax machine will be placed on the unit’s operating budget.”
4. The nurse supervisor has prepared an educational program for the nurse managers regarding
the various types of accounting reports that are used throughout the health care organization.
Which of the following statements by a nurse manager indicates an accurate understanding of
these reports?
1. “The cash-flow statement has two important sections: the revenue section and the
expenses section.”
2. “The income statement is used to determine whether the organization can pay its bills
over a specific time period.”
3. “The balance sheet is used to report information about what is owned by the
organization and what is owed to others.”
4. “The balance sheet is also known as a profit or loss statement.”
5. The nurse managers are discussing the health care organization’s recent adoption of a zero–
based budget. Which of the following statements is most closely associated with a zero-based
budget?
1. “It doesn’t take very long to do this type of budget.”
2. “The most difficult part about this type of budget is trying to find strong rationale to
keep something I’ve had for the last 3 years.”
3. “It’s nice to be able to adjust from the information I’ve used in the previous budget
report.”
4. “I can just focus on this department. I don’t have to worry about coordinating my
budget with any other manager.”
6. During the review of the previous budget with the actual numbers to determine variances, a
price variance was discovered on the Orthopedic Unit. Which of the following scenarios might
have resulted in this type of variance?
1. The minimum wage increased by 4%, and this affected the wages of three patient care
assistants.
2. The cost of Foley catheter insertion kits increased by 9% during the last year.
3. The number of knee replacements performed decreased by 14%.
4. The unit began accepting postoperative clients from the Surgical Intensive Care Unit.
7. The Intensive Care Unit nurse manager is reviewing the current budget, and is attempting to
anticipate variances. Which of the following could result in a cost variance?
1. The nurses are lobbying for a 4% increase in their wages from last year.
2. The organization was recently notified that the cost of tracheal suction kits will
increase by 7%.
3. The hospital is taking steps to move from a level II trauma center to a level I trauma
center.
4. The Surgical Department is performing fewer open heart surgeries after a cardiac
surgeon moved away from the area.
Learning Objective 4
Evaluate the components of the actual budget.
8. The nurse manager is preparing to perform budgeting activities. According to the budgeting
process, rank the following in order:
_____ Review organizational goals and future projections.
_____ Prepare the new budget using a budget worksheet.
_____ Review the unit’s financial performance.
_____ Review each variance with nurse supervisor.
_____ Identify all significant variances, and determine the amount of control that can be exerted
over the variance by the nurse manager.
Answer:
9. The Emergency Department nurse manager is monitoring the budget. Which of the following
pieces of information might have the most impact on the budget?
1. There are 14 full-time registered nurses, one patient care assistant, and two secretaries
employed on this unit.
2. The nurse manager recently purchased a fax machine and a copy machine, and has
requested a new bariatric bed for the unit.
3. The supplier of dressing materials recently increased its prices by 2%.
4. The nurse manager has requested three new wheelchairs and an ultrasound bladder-
scanning machine.
10. The nursing professors are asked by the department chairperson to submit a list of equipment
that could used to meet the department’s objectives. The list includes 12 new computers, a
mannequin for the nursing laboratory, and special software to use with the mannequin during
scenarios. The department chairperson categorizes these items into which type of budget?
1. Capital budget
2. Operating budget
3. Personnel budget
4. Supply budget
11. The nurse manager of a medical–surgical unit learned that the personnel budget for the
medical-surgical unit was lower than the personnel budget for the Intensive Care Unit. The nurse
manager wants to know the reason for this difference. Which of the following are the nurse
supervisor’s best responses? Select all that apply.
1. “The acuity level per client is much higher in the Intensive Care Unit, which results in
an increased nurse-to–client ratio.”
2. “The Intensive Care Unit has a much lower retention rate than your unit due to higher
stress levels.”
3. “Your unit was recently remodeled, so money was taken from your personnel budget
and moved to your capital budget.”
4. “The Intensive Care Unit and this unit have the same number of beds. I’ve made a
mistake with your personnel budget, and will fix it immediately.”
5. “The staff members have to be paid for education time to learn how to care for their
clients. Your staff members need less education time.”
Learning Objective 5
Analyze the relationship between the budget and the Nursing Department.
12. The novice nurse manager is discussing budgeting activities and variance reports with the
experienced nurse manager. Which of the following comments by the novice nurse manager
indicates that more education is needed?
1. “When I submit my monthly variance report, I need to provide a written explanation
for each variance.”
2. “I review my variances to determine the issues and identify whether there are ways
that I can help prevent the variance from occurring.”
3. “It is my responsibility to shelter my staff members from having to worry about this
side of client care.”
4. “Reviewing the budget and identifying variances is a great way to plan for next year’s
budget.”
13. The nurse manager is reviewing the previous month’s budget. The nurse manager notes that
there is a positive (or favorable) variance of full-time equivalents. This is most likely a result of
which of the following?
1. Overstaffed unit
2. Low client acuity
3. Increased use of supplies
4. Increased sick time use
14. A nursing manager notes an unfavorable or negative variance in the supply budget for the
month. Which of the following might have attributed to this issue?
1. Low client acuity levels
2. Three nurses used 12 hours of sick time during the last month.
3. Reduced unit occupancy rate
4. Four new nurses were hired immediately after taking their NCLEX board exams.
15. A nurse manager is educating staff members on the unit regarding the unit’s expenses. The
manager’s objective is to help the staff members become more careful and efficient when using
supplies on the unit. Which of the following actions might work to increase efficiency among the
staff members?
1. Hire more certified nursing assistants to provide direct client care activities.
2. Supplies will be moved out of the clean supply room and placed throughout the unit.
3. Label the cost of each item in the clean supply room.
4. Limit specific items, such as dressing change materials.