ALF Financial Management & Budgeting 3 — Questions and Answers
Question 1: Which of the following is a fixed cost for an assisted living facility?
- Property insurance premiums (Correct answer)
- Raw food costs
- Incontinence supply purchases
- Per-diem agency staffing
Correct answer: Property insurance premiums
Property insurance stays constant regardless of census, while food, supplies, and agency staffing vary with resident count.
Question 2: A facility charges a base rate plus tiered fees for additional care levels. This pricing model is best described as:
- Levels-of-care pricing (Correct answer)
- All-inclusive pricing
- Fee-for-service à la carte pricing only
- Capitated pricing
Correct answer: Levels-of-care pricing
Levels-of-care pricing sets a base rate with tiered add-ons based on assessed care needs.
Question 3: An administrator preparing next year's budget expects a 4% wage increase and a 3% supply cost increase. Which forecasting approach is being used?
- Incremental budgeting adjusted for known cost trends (Correct answer)
- Zero-based budgeting
- Static historical budgeting with no adjustments
- Cash-basis budgeting
Correct answer: Incremental budgeting adjusted for known cost trends
Adjusting prior-year figures upward by expected percentage changes is incremental (trend-based) budgeting.
Question 4: Which metric best measures how efficiently an ALF converts its available units into revenue?
- Revenue per occupied unit combined with occupancy rate (Correct answer)
- Total square footage of the building
- Number of licensed beds alone
- Annual staff turnover percentage
Correct answer: Revenue per occupied unit combined with occupancy rate
Revenue per occupied unit and occupancy rate together show both pricing effectiveness and how fully capacity is utilized.
Question 5: A resident's private funds are held by the facility. Which financial practice is required to protect those funds?
- Maintaining them in a separate account with individual accounting, never commingled with facility operating funds (Correct answer)
- Depositing them into the facility's general operating account
- Investing them in the facility's capital projects
- Holding them as petty cash in the business office
Correct answer: Maintaining them in a separate account with individual accounting, never commingled with facility operating funds
Resident trust funds must be kept separate from operating funds with individual records to prevent commingling and misappropriation.
Question 6: Which scenario represents a cash flow problem rather than a profitability problem?
- The facility is profitable on paper but cannot pay vendors because receivables are collected slowly (Correct answer)
- Expenses consistently exceed revenues every month
- The facility operates at 50% occupancy with high fixed costs
- Rates are set below the cost of providing care
Correct answer: The facility is profitable on paper but cannot pay vendors because receivables are collected slowly
Slow collections can leave a profitable facility short of cash to meet obligations, which is a timing issue rather than an earnings issue.
Question 7: Depreciation expense on the facility's building primarily affects the budget by:
- Allocating the building's cost over its useful life as a non-cash expense (Correct answer)
- Requiring a monthly cash payment to a depreciation fund
- Reducing the facility's property tax assessment automatically
- Increasing the resident daily rate by law
Correct answer: Allocating the building's cost over its useful life as a non-cash expense
Depreciation spreads an asset's cost over its useful life and reduces reported income without requiring a cash outlay.
ALF Financial Management & Budgeting 3
Which of the following is a fixed cost for an assisted living facility?