1. Review the attached budget report that includes current actuals, current budget, the annualized results based on this year’s YTD, and the prior year’s actuals to use for trending purposes. Build next year’s budget based on the following assumptions and explain why you set the budget category amounts where you set them, use the checklist for building a budget in chapter 15 for help:
   1. The volumes, units of service (UOS), will increase by 5%, both Inpatient days and Outpatient procedures
   2. The ratio of revenue per UOS will decrease by 1%
   3. The ratio of labor to the UOS, productivity target, will stay the same
   4. The labor costs will increase by 2%
   5. The supply costs will increase by 2%

QUESTION 24

1. A physician query may not be appropriate in which of the following instances?

   	A.	Diagnosis of viral pneumonia noted in a progress note and sputum cultures growing bacterial pathogens
   	B.	An operative report stating "lung cancer" when the pathology report states non-small cell carcinoma
   	C.	A final diagnosis of chest pain and abnormal cardiac enzymes indicative of an AMI
   	D.	Discharge summary indicating chronic renal failure when the progress notes document acute renal failure throughout the stay

10 points   

QUESTION 25

1. Coding and billing functions must be based on which of the following?

   	A.	Most efficient utilization of resources
   	B.	Provider documentation
   	C.	Patient preferences
   	D.	Highest available reimbursement amounts

10 points   

QUESTION 26

1. Which of the following represents the simplest definition of unbundling?

   	A.	Failure to use multiple procedure codes
   	B.	Assigning improper APCs
   	C.	Failure to use a comprehensive code
   	D.	Billing for global charges when only the professional component was supplied

10 points   

QUESTION 27

1. A patient with HIV positive status presents to urgent care complaining of chest pain and fever. After investigation, the physician determines pneumonia is present. For the physician claim, which diagnosis must be sequenced first (as primary)?

   	A.	B20
   	B.	Z21
   	C.	Z20.6
   	D.	J18.9

10 points   

QUESTION 28

1. Medicare hospital outpatient services are grouped by:

   	A.	APC
   	B.	RVU
   	C.	RUG
   	D.	DRG

10 points   

QUESTION 29

1. When endoscopy documentation does not specify the method used to remove a lesion during the procedure, which is the appropriate action to take? Choose from the list below.

   	A.	Assign a code for removal by hot biopsy forceps
   	B.	Ask nursing staff to document the removal in their notes
   	C.	Assign a code for ablation
   	D.	Query the physician responsible for the case

10 points   

QUESTION 30

1. Which of the following neoplasia types is correct for an adenocarcinoma?

   	A.	Benign
   	B.	Uncertain behavior
   	C.	Malignant
   	D.	Unspecified

10 points   

QUESTION 31

1. A Medicare patient is admitted to observation status as a result of suspected congestive heart failure. Using the table below, select the most appropriate code(s) for the hospital to report for this outpatient encounter:

   HCPCS/CPT Code	Descriptor
   G0378	Hospital Observation Service, per hour
   99221	Initial Hospital Care, per day, for evaluation and management of an inpatient
   99291	Critical Care, evaluation and management of the critically ill patient, first 30-74 minutes
   G0380	Level I Hospital Emergency Department visit

   	A.	99221
   	B.	G0378
   	C.	G0378, 99221
   	D.	G0380

10 points   

QUESTION 32

1. Which of the following reimbursement methods pays providers according to charges that are calculated before health care services are rendered?

   	A.	Resource-based payment approach
   	B.	Fee-for-service model
   	C.	Retrospective payment methodology
   	D.	Prospective payment system

10 points   

QUESTION 33

1. An electrolyte panel (80051) consists of test for carbon dioxide (82374), chloride (82435), potassium (84132), and sodium (84295). If a physician's office bills each component individually on the claim form, this would be an example of which of the following?

   	A.	Unbundling
   	B.	Optimization
   	C.	Sequencing
   	D.	Balance billing

10 points   

QUESTION 34

1. Of the following classification systems, which would be used to locate supply codes for durable medical equipment (DME) and surgical implants?

   	A.	ICD-10-PCS
   	B.	APCs
   	C.	HCPCS
   	D.	ICD-10-CM

10 points   

QUESTION 35

1. A family practitioner requests the opinion of a physician specialist in endocrinology. This specialist reviews the patient's health record and examines the patient. This physician specialist records findings, impressions and recommendations. Which service and type of report are being supplied by the specialist?

   	A.	Consultation
   	B.	Follow-up
   	C.	Interpretation
   	D.	Peer review

10 points   

QUESTION 36

1. All of the following items are packaged into an APC under OPPS, EXCEPT FOR:

   	A.	Recovery room
   	B.	Anesthesia drugs
   	C.	Professional charges
   	D.	Surgical supplies

10 points   

QUESTION 37

1. This means that a service or procedure is reasonable and necessary for the diagnosis or treatment of illness or injury consistent with generally accepted standards of care:

   	A.	Covered charge
   	B.	Excluded service
   	C.	Capitated amount
   	D.	Medical necessity

10 points   

QUESTION 38

1. Once all data are posted to a patient's account, the claim can be reviewed for accuracy and completeness. Many facilities have internal auditing systems. The auditing systems run each claim through a set of edits specifically designed for the various payers. The auditing system identifies data that have failed edits and flags the claim for correction. These internal auditing systems are called what?

   	A.	Scrubbers
   	B.	Clearinghouses
   	C.	Encoders
   	D.	Groupers

10 points   

QUESTION 39

1. Select the official ICD recommendations concerning the coding of secondary ("other") diagnoses for physician and outpatient services.

   	A.	Code all documented conditions that coexist at the time of the encounter, require or affect patient care treatment or management, or have an impact on current care.
   	B.	Code all conditions which coexist at the time of encounter, followed by the appropriate code from the V72 series (Special Investigations and Examinations).
   	C.	Code every condition documented on the encounter form or superbill, regardless of whether or not it has any impact on current health care needs.
   	D.	Do not code secondary diagnoses for physician or hospital outpatient reporting purposes.

10 points   

QUESTION 40

1. In determining which diagnosis code to sequence as first-listed (Primary) for physician or hospital outpatient services, the coder utilizes general coding guidelines, as well as chapter-specific guidelines and sequencing requirements of the tabular section. In addition, which other determinant helps the coder identify which code to list first for such encounters?

   	A.	The condition, diagnosis, problem, or other reason shown in the medical record to be chiefly responsible for the services provided.
   	B.	That condition, diagnosis, problem or other reason listed first in the medical record by the attending provider of service.
   	C.	That condition, diagnosis or problem determined to be most resource-intensive, severe, or acute in the set of diagnoses listed in the medical record.
   	D.	The condition established after study to be chiefly responsible for occasioning the admission the admission to the hospital.

10 points   

QUESTION 41

1. Of the following, which statement is true concerning the use of uncertain diagnoses for physician and hospital outpatient reporting?

   	A.	Follow internal policy on matters of coding uncertain diagnoses for outpatient or physician services.
   	B.	Query the provider on whether to code uncertain diagnoses for physician or outpatient services.
   	C.	Code uncertain diagnoses as if they actually exist.
   	D.	Do not code uncertain diagnoses, but code to the highest degree of certainty.

A Bloomberg BusinessWeek subscriber study asked, "In the past 12 months, when traveling for business, what type of airline ticket did you purchase most often?" A second question asked if the type of airline ticket purchased most often was for domestic or international travel. Sample data obtained are shown in the following table.

a. Using a .05 level of significance, is the type of ticket purchased independent of the type of flight? Use Table 12.4.

H ₀: - Select your answer -Type of ticket purchased is independent of the type of flight, Type of ticket purchased is not independent of the type of flight

H _a: - Select your answer -Type of ticket purchased is independent of the type of flight, Type of ticket purchased is not independent of the type of flight

Compute the value of the ² test statistic (to 2 decimals).


The p-value is Select : less than .005, between .005 and .01, between .01 and .025, between .025 and .05, between .05 and .10, greater than .10

What is your conclusion?
- Select your answer - Conclude that the type of ticket purchased depends upon whether the flight is domestic or international, Conclude that the type of ticket purchased is independent of the type of flight.

b. Discuss any dependence that exists between the type of ticket and type of flight.

- Select your answer - (A higher percentage of economy class tickets are purchased for international flights compared to domestic flights. First class and business class tickets are purchased more for domestic flights), (A higher percentage of first class and business class tickets are purchased for international flights compared to domestic flights. Economy class tickets are purchased more for domestic flights)

BUSINESS LAW

4. Because intellectual property rights are governed by statute. not common law, a plaintiff who has suffered a breach of its trademark rights cannot claim the equitable remedies of an injunction or an accounting: it can only receive an order for damages

1) True

2) False

7. If an employee becomes disabled, the employer must attempt to accommodate the employee so that her employment may continue, however only up to the point of undue hardship.

1) True

2) False

15. Your brother wants to borrow $80000 from the Bank of Victoria and has asked if you would guarantee the loan. You have been told the following with regard to guarantees. Which of the following statements is CORRECT?

1) As guarantor, you cannot be relieved of your obligation if the bank fails to disclose financial information in relation to your brother in the bank's possession.

2) A guarantor becomes liable on the debt as soon as the principal debtor defaults on the loan granted to him.

3) You, as guarantor cannot be relieved of your obligation if the bank does something to weaken your position-e.g., by agreeing with your brother to increase the amount without your consent.

4) If he defaulted on his payments and you had to pay the debt to the bank you would not be subrogated to the rights of the bank i.e., you would get the bank's right to sue your brother

5) A legally enforceable guarantee need not be in writing as long as it is witnessed.

27. Tim is employed as a software developer for a small company. He is assigned to head a project to develop new accounting software for an important client. The project has a strict deadline for completion: under its terms, the company must pay the client damages for every day it is late. After weeks of hard work and stress, the project is falling behind and not likely to be completed on time. One evening, while walking on the beach, Tim finds inspiration to seek a more peaceful life. The next morning, he telephones his manager to say that he is quitting immediately to live a life of quiet meditation. The manager desperately starts looking for someone to finish the project. In these circumstances, which of the following is FALSE

1) if the project is not completed on time and the client sues, the company can sue Tim for breach of contract

2) the company is legally obligated to mitigate its damages by reasonably trying to hire a replacement for Tim

3) Tim cannot be held liable because an employee does not have a duty to give notice when resigning

4) even if the Employment Standards Act does not require a minimum notice period to be given by an employee who quits, there is still a duty to give such notice in common law

5) an employee can leave at any time without notice if the employer has breached the employment contract by fundamentally changing its terms

28. Which of the following is FALSE if an inventor has her application for a patent granted:

1) She has the right to renew the period of protection at the expiry of the first period

2) She can no longer claim that the invention is a trade secret

3) She has the right to sue someone who uses the invention without her permission

4) Infringement of the patent can be a civil wrong

5) She has the exclusive right to make. use and sell the Invention for a period of 20 years

29. A secured creditor has the right upon default to:

1) Claim its contractual remedies

2) Seize the security

3) Sell the security

4) Sue the debtor rather than seize the security

5) All of the above

31. In regard to patent law, which of the following BEST describes an invention that can patented?

1) A genetically modified plant

2) An original artistic work

3) An important scientific theory

4) An idea for a new movie.

32. The Sale of Goods Act adds a number of implied terms to a sale of goods transaction. Which of the following statements is NOT an implied term under the Sale of Goods Act

1) The seller promises the buyer good title

2) The buyer is promised satisfaction or the right to get his money back

3) Goods sold by description must match the description

4) Where goods are sold by sample, the bulk of the goods must match the sample

5) The goods will be of free of liens and other eumbrances

35. Which of the following statements is FALSE in regard to "property":

1) Both real and personal property can be pledged as security to a creditor

2) Real property includes land but does not include the buildings on that land

3) Personal property includes intangible rights such as the right to receive payment of a debt

4) Personal property includes chattels

5) Real property includes "fixtures"

36. A trademark can be protected for an indefinite period of time if it is renewed every 15 years

1) True

2) False

37. Which of the following is NOT an example of a statute that protects intellectual property:

1) The Patent Act

2) The Trademark Act

3) The Copyright Act

4) The Industrial Designs Act

5) The Confidential Information Act

38. If a guarantor signs a continuing guarantee, he may continue to be bound by the guarantee even though the creditor and the debtor agree to later changes that put the guarantor at greater risk of being called upon to pay the debt.

1) True

2) False

40. Which of the following statements is FALSE regarding bankruptcy law:

1) A debtor may be insolvent without being in bankruptcy

2) A debtor who cannot pay his debts can make a voluntary assigns ent in bankruptcy

3) a debtor does not pay his debts, his creditors can force him into bankruptcy

4) A debtor is released from bankruptcy by a court order called "discharge"

5) When a debtor is released from bankruptcy. all his unpaid debts of every kind are cancelled

41. Which of the following is NOT just cause for dismissal of an employee:

1) Serious absenteeism

2) Consistently being late

3) Continual disobedience

4) Continual negligence or incompetence

5) The employer does not have enough work for the employee to do

44. Under the Sale of Goods Act, unless the parties have agreed otherwise, the purchaser of a finished good in deliverable condition bears the risk of loss from the moment the sale agreement is made, even though she will not pay for the good or take delivery until a week later.

1) True

2) False

48. Which of the following terms or documents is NOT used to determine when title or risk of loss pass to the buyer of goods:

1) Cost, insurance and freight

2) Free on board

3) Cash on delivery

4) Bill of lading

50. To which one of the following contracts would the Sale of Goods Act NOT apply:

1) A meal in a restaurant

2) The sale of a house

3) A sale of future goods when title will pass in the future

4) The purchase of a car

5) The sale of tangible personal property

Karlow Corporation owns 60 percent of Draw Company’s voting shares. During 20X3, Karlow produced 27,000 computer desks at a cost of $86 each and sold 12,000 of them to Draw for $98 each. Draw sold 8,000 of the desks to unaffiliated companies for $142 each prior to December 31, 20X3, and sold the remainder in early 20X4 for $152 each. Both companies use perpetual inventory systems.

a. What amounts of cost of goods sold did Karlow and Draw record in 20X3?

b. What amount of cost of goods sold must be reported in the consolidated income statement for 20X3? (Do not round intermediate calculations.)

c.   A worksheet with consolidation entry or entries is needed in preparing consolidated financial statements at December 31, 20X3, relating to the intercorporate sale of inventory. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations.)

Entry 1- Record the consolidation entry for the intercorporate sale of inventory.

d. A worksheet with consolidation entry or entries is needed in preparing consolidated financial statements at December 31, 20X4, relating to the intercorporate sale of inventory. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations.)

Entry 1- Record the consolidation entry for the intercorporate sale of inventory.

e. A worksheet with consolidation entry or entries is needed in preparing consolidated financial statements at December 31, 20X4, relating to the intercorporate sale of inventory if the sales were upstream. Assume that Draw produced the computer desks at a cost of $86 each and sold 12,000 desks to Karlow for $98 each in 20X3, with Karlow selling 8,000 desks to unaffiliated companies in 20X3 and the remaining 4,000 in 20X4. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations.)

Entry 1- Record the consolidation entry for the intercorporate sale of inventory.

SPD Tax Service is a regional tax preparation firm that competes with such national chains as H&R Block. The company is considering expanding and needs a financial model to analyze the decision to open a new store. Key factors affecting this decision include the demographics of the proposed location, price points that can be achieved in the target market, and the availability of funds for marketing and advertising. Capital expenditures will be ignored because unused equipment from other locations can often be shifted to a new store for the first year until they can be replaced periodically through the fixed cost budget. SPD’s target markets being considered are communities with populations between 30,000 and 50,000, assumed to be uniformly distributed. Market demand for tax preparation service is directly related to the number of households in the territory; approximately 15% of households are anticipated to use a tax preparation service. Assuming an average of 2.5 people per household, this can be expressed as 0.15*population/2.5. SPD estimates that its first year demand will have a mean of 5% of the total market demand, and for every dollar of advertising, the mean increases by 2%. The first year demand is assumed to be normal with a standard deviation of 20% of the mean demand. An advertising budget of $5,000 has been approved but is limited to 10% of annual revenues. Demand grows fairly aggressively in the second and third year and is assumed to have a triangular distribution with a minimum value of 20%, most likely value of 35%, and maximum value of 40%. After year 3, demand growth is between 5% and 15%, with a most likely value of 7%. The average charge for each tax return is $175, and increases at a rate that is normally distributed with a mean of 4% with a standard deviation of 1.0% each year. Variable costs average $15 per customer, and increase annually at a rate that is normally distributed with a mean of 3% with a standard deviation of 1.5%. Fixed costs are estimated to be approximately $35,000 for the first year, and grow annually at a rate between 1.5% and 3%. Develop a Monte Carlo simulation model to find the distribution of the net present value of the profitability of a new store over a 5-year period using a discount rate of 5%.

You have just been hired as a new management trainee by Earrings Unlimited, a distributor of earrings to various retail outlets located in shopping malls across the country. In the past, the company has done very little in the way of budgeting and at certain times of the year has experienced a shortage of cash. Since you are well trained in budgeting, you have decided to prepare a master budget for the upcoming second quarter. To this end, you have worked with accounting and other areas to gather the information assembled below.

The company sells many styles of earrings, but all are sold for the same price—$16 per pair. Actual sales of earrings for the last three months and budgeted sales for the next six months follow (in pairs of earrings):

The concentration of sales before and during May is due to Mother’s Day. Sufficient inventory should be on hand at the end of each month to supply 40% of the earrings sold in the following month.

Suppliers are paid $5.00 for a pair of earrings. One-half of a month’s purchases is paid for in the month of purchase; the other half is paid for in the following month. All sales are on credit. Only 20% of a month’s sales are collected in the month of sale. An additional 70% is collected in the following month, and the remaining 10% is collected in the second month following sale. Bad debts have been negligible.

Monthly operating expenses for the company are given below:

Insurance is paid on an annual basis, in November of each year.

The company plans to purchase $21,000 in new equipment during May and $50,000 in new equipment during June; both purchases will be for cash. The company declares dividends of $22,500 each quarter, payable in the first month of the following quarter.

The company’s balance sheet as of March 31 is given below:

The company maintains a minimum cash balance of $60,000. All borrowing is done at the beginning of a month; any repayments are made at the end of a month.

The company has an agreement with a bank that allows the company to borrow in increments of $1,000 at the beginning of each month. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded. At the end of the quarter, the company would pay the bank all of the accumulated interest on the loan and as much of the loan as possible (in increments of $1,000), while still retaining at least $60,000 in cash.

Required:

Prepare a master budget for the three-month period ending June 30. Include the following detailed schedules:

1. a. A sales budget, by month and in total.

    b. A schedule of expected cash collections, by month and in total.

    c. A merchandise purchases budget in units and in dollars. Show the budget by month and in total.

    d. A schedule of expected cash disbursements for merchandise purchases, by month and in total.

You have just been hired as a new management trainee by Earrings Unlimited, a distributor of earrings to various retail outlets located in shopping malls across the country. In the past, the company has done very little in the way of budgeting and at certain times of the year has experienced a shortage of cash. Since you are well trained in budgeting, you have decided to prepare a master budget for the upcoming second quarter. To this end, you have worked with accounting and other areas to gather the information assembled below.

The company sells many styles of earrings, but all are sold for the same price—$16 per pair. Actual sales of earrings for the last three months and budgeted sales for the next six months follow (in pairs of earrings):

The concentration of sales before and during May is due to Mother’s Day. Sufficient inventory should be on hand at the end of each month to supply 40% of the earrings sold in the following month.

Suppliers are paid $5.00 for a pair of earrings. One-half of a month’s purchases is paid for in the month of purchase; the other half is paid for in the following month. All sales are on credit. Only 20% of a month’s sales are collected in the month of sale. An additional 70% is collected in the following month, and the remaining 10% is collected in the second month following sale. Bad debts have been negligible.

Monthly operating expenses for the company are given below:

Insurance is paid on an annual basis, in November of each year.

The company plans to purchase $21,000 in new equipment during May and $50,000 in new equipment during June; both purchases will be for cash. The company declares dividends of $22,500 each quarter, payable in the first month of the following quarter.

The company’s balance sheet as of March 31 is given below:

The company maintains a minimum cash balance of $60,000. All borrowing is done at the beginning of a month; any repayments are made at the end of a month.

The company has an agreement with a bank that allows the company to borrow in increments of $1,000 at the beginning of each month. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded. At the end of the quarter, the company would pay the bank all of the accumulated interest on the loan and as much of the loan as possible (in increments of $1,000), while still retaining at least $60,000 in cash.

3. A budgeted income statement for the three-month period ending June 30. Use the contribution approach.

Prepare a master budget for the three-month period ending June 30 that includes a budgeted income statement for the three-month period ending June 30. Use the contribution approach.