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 operating plans. For example, if the budget was based on 400 patient-days (number of patients × number of days in the hospital) and the actual count rose to 450 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 method is being used under the new approach?
2.What budgeting method do you think was being used under the old method?
3.Which method do you think is the better method for the hospital? Give justifications using concepts to justify your answer.
