ANM Financial Management and Budgeting 2 — Questions and Answers
Question 1: A nurse manager notices supply costs are 15% over budget midway through the fiscal year. What is the FIRST action to take?
- Request an immediate budget increase
- Analyze variances to identify the root cause (Correct answer)
- Reduce staffing to offset supply costs
- Defer all non-emergency supply orders
Correct answer: Analyze variances to identify the root cause
Variance analysis identifies whether the overage is due to volume, price, or efficiency issues before corrective action is taken.
Question 2: Which budget type allocates resources based on expected patient volume and service demand for the upcoming period?
- Zero-based budget
- Capital budget
- Flexible budget (Correct answer)
- Static budget
Correct answer: Flexible budget
A flexible budget adjusts planned expenditures based on actual or anticipated volume of activity.
Question 3: When calculating the cost per patient day, which of the following is the correct formula?
- Total revenue divided by patient days
- Total expenses divided by patient days (Correct answer)
- Fixed costs divided by variable costs
- Direct costs divided by indirect costs
Correct answer: Total expenses divided by patient days
Cost per patient day is determined by dividing total unit expenses by the total number of patient days in the period.
Question 4: A hospital is comparing the long-term financial benefit of purchasing new infusion pumps versus continuing to rent them. This decision requires a:
- Break-even analysis (Correct answer)
- Variance analysis
- Zero-based budget review
- Operating budget adjustment
Correct answer: Break-even analysis
Break-even analysis determines the point at which the cost of purchasing equals the cumulative cost of renting, guiding the capital investment decision.
Question 5: Indirect costs in a nursing unit budget are BEST described as costs that:
- Vary directly with patient census
- Are directly attributable to patient care activities
- Support operations but cannot be directly linked to a specific unit (Correct answer)
- Are included in capital expenditure requests
Correct answer: Support operations but cannot be directly linked to a specific unit
Indirect costs, such as housekeeping and administrative overhead, support the organization but are allocated rather than directly charged to a unit.
Question 6: When preparing a staffing budget, the nurse manager must account for productive versus non-productive hours. Non-productive hours include:
- Overtime hours worked at the bedside
- Hours worked during holidays for patient care
- Paid time off, sick leave, and education time (Correct answer)
- Hours allocated for charge nurse duties
Correct answer: Paid time off, sick leave, and education time
Non-productive hours are paid hours during which employees are not directly providing patient care, including vacation, sick days, and in-service training.
Question 7: The ANM is reviewing a proposal to add a full-time RN position. Which financial metric would BEST demonstrate the value of this investment to administration?
- Gross revenue per nurse
- Return on investment including quality and safety outcomes (Correct answer)
- Total salary and benefits cost only
- Number of overtime hours currently being used
Correct answer: Return on investment including quality and safety outcomes
ROI that incorporates quality metrics such as reduced falls, infections, or readmissions demonstrates comprehensive financial and operational value.
ANM Financial Management and Budgeting 2
A nurse manager notices supply costs are 15% over budget midway through the fiscal year.
What is the FIRST action to take?