Children’s Hospital of the King’s Daughters Health System in Norfolk, Virginia, introduced a new budgeting method that allowed the hospital’s annual plan to be updated for changes in actual operations. For example, if the budget was based on 1,000 patient-days (number of patients 3 number of days in the hospital) and the actual count rose to 1,200 patient-days, the variable costs of staffing, lab work, and medication costs could be adjusted to reflect this change. The budget manager stated, “I work with hospital directors to turn data into meaningful information and effect change before the month ends.”

1. What budgeting methods are being used under the new approach?

2. Why are these methods superior to the former approaches?