1 A Gross Profit Margin is:

A measure of profitability that shows the percentage of revenue that exceeds the cost of goods sold (COGS)

The ratio of net profits to revenues for a company or business segment

The income received by a company from its sales of goods or the provision of services

The absolute dollar amount of revenue that a company generates beyond its direct production costs

2 Menu engineering should consider (1) contribution margin, (2) popularity of a menu item and (3) customer demand.

Select one:

True

False

3 Which two components can the flexible budget variances be broken down into?

Price or cost variances and quantity variances

Labour cost variance and actual variable labour hours

The difference between the static budget and flexible budget

The actual price and the budgeted price

4 What does the supply and demand analysis show?

The number of each item sold per period

That there is a market for the business

How the company will pay for all the costs

The relevant and irrelevant costs

5 Net present value (NPV) and internal rate of return (IRR) are two capital budgeting methods.

True False

6. How is the static budget variance calculated?

By finding the difference between the budgeted cost and actual cost

By multiplying the difference between direct labour hours and budgeted direct labour hours

By multiplying the difference between the actual price and the budgeted price

By finding the difference between the static budget and the actual results

7 The budgeted quantity used for:

The static budget

The actual sales volume

The budgeted cost

The budgeted labour

8 Value-based pricing is a method in which a business sets prices based on what competitors may charge for similar items.

Select one:

True

False

9 What does the residual (or salvage) value of an asset refer to?

The present value factor from the Present Value Factors of an Annuity table

The time value of money

The difference between the value of cash inflows and the value of cash outflows

The value that an asset can be sold for at the end of its useful life

10 Relevant costs are costs that differ between alternatives in a specific decision.

Select one:

True

False

11 Puzzles are:

Menu items that have high profitability and high popularity

Menu items that have high profitability and low popularity

Menu items that have low profitability and low popularity

Menu items that have low profitability and high popularity

12 A favourable variance occurs when:

It leads to an increase in income

It leads to a change in relation to sales volume

It leads to a decrease in income

It leads to a decrease budgeted quantity

13 The make-or-buy decision is also known as:

The next-best forgone alternative

The change between alternatives

The performance decision

The outsourcing decision

14 The capital budget summarizes the companys plans for the quantity of inventory that needs to be purchased.

Select one:

True

False

15 What is the formula to determine occupancy rate?

Number of Rooms Occupancy Rate Days in the Period

Building Cost Number of Rooms $1,000

(Number of Rooms Occupied or Sold Number of Rooms Available) 100%

Number of Rooms Occupancy Rate x Building Cost

16 What is a point-of-sale (POS) system?

It records guest reservations, tracks room inventory, and check guests in and out

It tracks cash inflows from lenders or investors

It is used by restaurants to input orders, generate bills and track payments

It accepts or rejects a special job, such as a catering job

17 Compound interest is the effect of interest earning interest.

Select one:

True

False

18 What does the purchases budget forecast?

The average check and seat turnover

The quantity of inventory that needs to be purchased to fill the expected sales

The accounts receivable amount on the budgeted balance sheet

An estimated budget data as if there have been no previous activities

19 A favourable variance occurs when it leads to an increase in income.

Select one:

True

False

20 The equipment selection decision is:

An organization deciding which equipment to replace

An organization deciding which equipment to purchase

Identifying the net present value of the equipment

Evaluating the equipments required rate of return

21 A price variance occurs when there is a difference between the budgeted price and the actual selling price.

Select one:

True

False

22 A static budget is a budget is prepared using budgeted selling prices, budgeted costs and actual sales volume.

Select one:

True

False

23 Cost of capital is the minimum rate of return that owners or investors expect from a capital expenditure.

Select one:

True

False

24 The sales budget forecasts plans for acquiring and selling capital assets.

Select one:

True

False

25 Target costing is the process of using selling and administrative costs to determine the cost of a service?

Select one:

True

False

26 A budget is a numerical tool, usually expressed in terms of money that helps managers reach the financial goals in their business plans.

Select one:

True

False

27 One of the common types of hospitality business decisions that are based on relevant cost principles is:

To show that there is a market for the business

To track costs incurred and can never be recovered

To track room inventory

To keep or drop a product or service

28 An example of a capital expenditure is:

New hotel furniture

Wine for the restaurant

Tools for maintenance

Housekeeping supplies

29 Sunk costs are sometimes relevant to a decision.

Select one:

True

False

30 Markup is the difference between a products selling price and its cost.

Select one:

True

False

31 The two benefits of budgeting are:

Budgets provide less financial security and a higher likelihood of going into debt

Budgets can create competition for resources and politics

Budgets are applied mechanically and rigidly

Budgets provide a more detailed picture of what goals need to be accomplished and can be compared to actual amounts

32 What items should be included when determining the full cost of a service?

Fixed overhead costs

All of the choices listed

Material costs

Variable overhead costs

Direct labour costs

33 The sales budget forecasts:

The companys short-term and long-term credit needs

The expected revenue for a given period

A comprehensive analysis on all aspects of operations

The quantity of inventory that needs to be purchased

34 Opportunity cost is the value of choosing the next-best alternative.

Select one:

True

False

35 Present value refers to the interest rate that is applied to the initial investment.

Select one:

True

False

36 In capital budgeting one of the advantages of a cash payback method is:

The shorter the payback period, the better the investment is

It is the rate of return that owners or investors expect

It increases the value that an asset can be sold for

It reduces the companys required level of risk

37 The sales budget, purchases budget and operating expenses budget are used to create the budgeted income statement of a Hospitality company.

Select one:

True

False

38 Bottom-up budgeting:

Is where all the budgeted figures are determined by upper management and imposed throughout the organization

Is the budgeted income statement and budgeted balance sheet

Involves managers from all levels of the organization participating in the creation of the budget

Is the tendency of employees to intentionally underestimate revenues and overestimate expenses

39 The budgeted quantity is used in the static budget.

Select one:

True

False

40 Differential cost is the difference in total costs between two choices.

Select one:

True

False