ALF Financial Management and Budgeting 2 — Questions and Answers
Question 1: An ALF administrator notices that actual food service costs exceeded the budgeted amount by 12% for the quarter. What is the most appropriate first step?
- Terminate the dietary manager
- Immediately reduce portion sizes for residents
- Raise resident fees to cover the difference
- Perform a variance analysis to identify the cause of the overage (Correct answer)
Correct answer: Perform a variance analysis to identify the cause of the overage
Variance analysis identifies whether the overage stems from census changes, price increases, or waste before corrective action is taken.
Question 2: Which budgeting method requires every expense line to be justified from scratch each budget cycle rather than adjusting prior-year figures?
- Rolling budgeting
- Flexible budgeting
- Zero-based budgeting (Correct answer)
- Incremental budgeting
Correct answer: Zero-based budgeting
Zero-based budgeting starts each line item at zero and requires justification for all spending regardless of prior budgets.
Question 3: In an assisted living facility, resident rent and care fees are typically classified on the income statement as what?
- Capital contributions
- Non-operating income
- Deferred liabilities
- Operating revenue (Correct answer)
Correct answer: Operating revenue
Fees for housing and care services are the facility's core operating revenue.
Question 4: A facility's accounts receivable aging report shows a growing balance in the 90+ day column. What does this most directly indicate?
- The facility is overstaffed
- Occupancy is increasing
- Collections problems that threaten cash flow (Correct answer)
- Depreciation is being calculated incorrectly
Correct answer: Collections problems that threaten cash flow
Receivables aging past 90 days signal collection difficulties that reduce available cash.
Question 5: Which of the following is a fixed cost for an assisted living facility?
- Raw food costs
- Overtime nursing wages
- Incontinence supply purchases
- Property insurance premiums (Correct answer)
Correct answer: Property insurance premiums
Property insurance stays constant regardless of occupancy, unlike food, supplies, or overtime that vary with census and care needs.
Question 6: An administrator preparing a capital budget would include which of the following items?
- Monthly laundry detergent purchases
- Cable television service fees
- Employee payroll taxes
- Replacement of the facility's HVAC system (Correct answer)
Correct answer: Replacement of the facility's HVAC system
Capital budgets cover major long-lived asset purchases like HVAC systems, not routine operating expenses.
Question 7: A facility with 100 units has 88 occupied units. What is its occupancy rate?
- 80%
- 12%
- 88% (Correct answer)
- 92%
Correct answer: 88%
Occupancy rate equals occupied units divided by total units, so 88/100 = 88%.
