1A. When someone refers to the "marginal cost" of performing some additional activity, they are referring to:

a. The additional incremental costs of the activity focus on just those costs that are changing.

b. The costs of doing just a basic, low-quality job.

c. The total costs of the activity as assigned by a financial accountant.

d. The addition to the bottom line generated by performing the activity.

1B. Suppose you know that the break-even point for a new service is 1000 patient visits. Which of the following statements is false?

a. Fixed costs divided by contribution margin must be 1000.

b. Reducing fixed costs would reduce the break-even point.

c. Increasing variable costs would decrease the break-even point.

d. Increasing price would decrease the break-even point.

1C. Suppose that you have fixed costs of $400,000 per year and hope to make a profit of $200,000. Your average collections per patient visit are $120 and your variable costs are $20 per patient visit. How many patients will you need to achieve your profit goal?

a. 4000

b. 5000

c. 6000

d. 8000

1D. Allocated overhead costs would properly be considered when it comes to making which one of these decisions?

a. Whether to perform more or less of a particular surgical procedure

b. To determine a full price for a service

c. To help determine the effectiveness of the manager in charge of a department

d. To determine marginal costs

1E. If the contribution margin for a Primary Care Clinic stays constant and its monthly fixed costs increase from $10,000 to $20,000, then the Clinic's break-even quantity:

a. Increases.

b. Decreases.

c. Stays the same.

d. We cannot determine which way it will go, if any.

1F. Suppose you know that fixed costs are $120,000 for a nurse-run clinic, the average amount collected per patient is $80, and the variable cost per patient is $20. What is the break-even point?

a. 1200

b. 1500

c. 2000

d. 6000

1G. To determine the number of patients needed to earn a specific profit amount, we would use the break-even analysis technique, but in the calculation, the desired profit amount would be:

a. Added to the fixed costs.

b. Added to the price.

c. Subtracted from the fixed costs.

d. Subtracted from the price.

1H. How might the nurse manager of a hospital inpatient unit manage differently under the prospective payment system (i.e., DRGs) than he or she managed under a cost-based system? He or she would:

a. Manage costs by decreasing the length of stay.

b. Be less concerned with managing the total cost of care for an episode.

c. Focus on the hospital receiving prompt payment for care.

d. Focus on government regulation of staffing levels.

1I. Assume that you are the manager of a 30-bed medical unit in an acute care hospital. The total fixed costs of your unit are $18,000 per day. The variable costs of your unit are approximately $1000 per patient per day, at the typical level of patient acuity generally observed on your unit. What is the total cost of care for each patient for each day of care if your unit has 80% occupancy?

a. $175

b. $1750

c. $750

d. $18,000

1J. Assume that you are the manager of a 30-bed medical unit in an acute care hospital. The total fixed costs of your unit are $18,000 per day. The variable costs of your unit are approximately $1000 per patient per day, at the typical level of patient acuity generally observed on your unit. What is the total cost of care for each patient for each day of care if your unit has 50% occupancy?

a. $1200

b. $120

c. $9000

d. $2200

1K. The service unit for the clinic in which a nurse practitioner works is "patient visit to the clinic." Costs that are included when estimating the cost of this service unit are:

a. Nurse practitioner salary.

b. Hospital costs for patients admitted to the hospital from the practice.

c. Automobile used by the staff nurse to make home visits.

d. Loan repayments paid by the nurse practitioner for graduate school.

1L. The average cost of care can be expressed as:

a. The sum of variable and fixed costs.

b. The full cost divided by the volume of service units.

c. Variable costs divided by service units.

d. Fixed costs minus variable costs.

1M. The nurse responsible for the budget of an ambulatory care center can expect the fixed costs to:

a. Remain the same over the relevant range.

b. Remain the same over any range of volume.

c. Change depending on the variable costs.

d. Change as the marginal costs decrease.

1N. Which of the following is a direct cost for a hospitalized patient? The cost of the:

a. Hours worked by the nurse manager of the unit.

b. Fax machine on the unit.

c. Patient's medication.

d. A security guard in the hospital's parking garage.

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