Finance and Budgeting Flashcards

A healthcare facility manager is preparing a capital budget request for a new HVAC system. Which financial metric best demonstrates the project's long-term value to administration?

Answer: Net present value (NPV)

NPV accounts for the time value of money and shows the net financial benefit of the investment over its useful life.

Under the modified accelerated cost recovery system (MACRS), a healthcare facility's medical equipment is typically depreciated over how many years?

Answer: 5 years

MACRS classifies most medical equipment as 5-year property for federal tax depreciation purposes.

A facility's utilities expense is $120,000 per month against a budget of $110,000. What is the budget variance percentage?

Answer: +9.1%

Variance % = (Actual − Budget) / Budget × 100 = (120,000 − 110,000) / 110,000 × 100 = +9.1%.

Which type of cost remains constant per unit regardless of the volume of services provided in a healthcare facility?

Answer: Variable cost

Variable costs change in direct proportion to service volume, so the per-unit cost stays constant.

A healthcare facility manager is evaluating two vendors using a life-cycle cost analysis. Which cost category is most commonly overlooked in initial bids?

Answer: Operating and maintenance cost over the asset's life

Operating and maintenance costs often exceed the initial purchase price over an asset's useful life and are frequently omitted from vendor bids.

When a hospital reallocates overhead costs (e.g., facility management) to revenue-generating departments, this process is called:

Answer: Cost allocation

Cost allocation distributes indirect or overhead expenses to the departments that benefit from those services.

A facility manager requests an emergency repair costing $45,000 but the approved capital threshold is $50,000. This expenditure should be classified as:

Answer: Operating expenditure

Because the cost falls below the facility's capitalization threshold, it is expensed as an operating expenditure in the current period.