In our industry, budgeting is a very important activity that involves deep conce

Question

In our industry, budgeting is a very important activity that involves deep concentration by the healthcare administrator, along with significant collaboration and participation by the clinician leaders as well. Even with all of these great minds working together, the team will never be able to forecast a perfect budget that is always 100% correct.

As a result, variance analysis is conducted by the organizational leaders to not only project future revenues/expenses, but to also understand the effect of variance upon previous projected volumes and other workload. Therefore, some things are assumed, or even taken for granted when developing a budget for a future financial period. One could even say that specific budget types are generated based upon prior financial data (financial statements), ceteris paribus.

What is ceteris paribus, and discuss how it fits into the budgeting activities mentioned above. Finally, also be sure to discuss what specific budget activity you believe ceteris paribus to be clearly utilized in.

My question is, I am not sure which budgeting system ceteris paribus would be most utilized in and why?

Explanation / Answer

Answer: Ceteris Paribus means holding all other factors equal so that only one factor being studied is allowed to change. When making an economic analysis such as utility we assume ceteris paribus because it simplifies the study and allows us to isolate the factors being studied. This does not mean that all the other factors are not important. Ceteris Paribus is just a tool used to simplify the economic model. As you can imagine, it would be a lifelong task to figure every single factor involved in an economic decision therefore it is necessary to simplify economic models by ceteris paribus.

Healthcare organizations use various types of budgets to monitor the financial status of their organization, such as operating, program, product line, cash, or capital. A budget is a plan, roadmap, or a tool used by managers to ensure that quality and cost-effective services are provided to patients. In particular, nurse managers use budgets to monitor personnel and supply costs. It is important that nurse managers are familiar with the different types of budgets, specifically the operating budget, because it is the nurse manager who is closest to the patient and knows exactly what is needed to provide care and services

Activity - Based Budgeting would be most utilised in this organization because it provides a detailed budget for each specific activity involved in delivering a service or within department or organization.

Related Questions

Navigate

• Browse (All)
• Browse I
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.