Deck 11: Controlling Costs

Question 1

What is NOT a major short- term liability?

A) Payments to suppliers
B) Paying rent on the space
C) Employee wages

Answer 1

B

Question 2

The restaurant must balance the need for it to have sufficient supplies on hand so that it will not run out of items with what fact?

A) That space used to store inventory could go to better use
B) That inventory costs money
C) That customers would rather eat at restaurants with less inventory

Answer 2

B

Question 3

Break- even charts are useful at times. What are some of their weaknesses?

Answer 3

Useful as they are, break- even charts can be only a rough approximation of profit. This is, in part, because assumptions must be made regarding allocation of costs. Cost allocations are good only over short ranges of sales volume. When they are extrapolated beyond that range, the analysis is less exact. In addition, this analysis works best when there is only one product. In a restaurant where there are many items on the menu, mark- ups will vary and an average will have to be used. This limits the accuracy of the analysis.

Question 4

The current ratio measures how strong the business is in its ability to do what?

A) Purchase adequate inventory
B) Pay off short- term debts
C) Pay off long- term debts

Question 5

How is the cost of food sales calculated? Beverage sales?

Question 6

The has been developed by the accounting firm of Laventhol and Horwath and accepted by the National Restaurant Association as a blueprint for categorizing revenues and costs and laying out a statement of income.

Question 7

Operating profit typically increases as sales volume does what?

A) Maintains a good ratio
B) Decreases
C) Increases

Question 8

Solvency ratios measure what ability?

A) Repay debts
B) Make a profit
C) Maintain a clean environment

Question 9

The term refers to the profit kept within the business.

Question 10

List and explain the three basic steps of systematically analyzing a statement of income.

Question 11

"Planning of expenditures whose returns are expected to extend beyond one year" is the definition of what term?

A) Fixed- costs budgeting
B) Labor cost budgeting
C) Capital budgeting

Question 12

Because inventories can vary from to , a physical inventory should always be taken on the same day of the week.

Question 13

How much is "enough" profit?

A) Enough to keep the owners happy with their investment
B) $50,000 per year
C) 10 percent of sales

Question 14

Income before Rent and Other Occupation Costs is obtained by subtracting total
from total .

Question 15

is the profit after taking the cost of sales-food and beverage-from total revenue.

Question 16

What is an example of semi- variable costs?

A) Labor costs
B) Cleaning supplies
C) Rent

Question 17

Although it is fairly easy to estimate future costs, it is much more difficult to calculate changes in sales brought about by .

Question 18

List five controllable expenses.

Question 19

Sufficient cash must be available to meet current expenses. What should be done with remaining cash?

A) It should be invested in a mutual fund to make money
B) Stored in a safe in the back of the restaurant
C) It should be in a bank, to generate interest

Question 20

What is the difference between current assets and current liabilities?

A) Invested capital
B) Profits
C) Working capital

Question 21

Price elasticity means that the demand is sensitive to changes in price.

Question 22

The discounted or internal rate of return considers the time value of money and determines the rate of return that would result when the present value of the return equals the
.

Question 23

The two fundamental accounting statements are the and the .

Question 24

Activity ratios show how well employees are using the assets of the operation in generating income.

Question 25

Depreciation is a non- cash, tax- deductible expense.

Question 26

Give a brief explanation of the various parts of a break- even chart.

Question 27

Variable expenses are those that only vary proportionately with sales.

Question 28

Net income is what is left after only expenses have been subtracted.

Question 29

Current liabilities are those payable within the month.

Question 30

is a rate of return that equalizes the present value of the return and the investment.

Question 31

Fixed assets are those items that have a life longer than a year.

Question 32

List and describe the four methods of prioritizing capital projects.

Question 33

Liquidity ratios determine the extent to which a business can meet short- term obligations as and when they become due.

Question 34

The relative proportion of food to beverage revenue is important because the cost of sales for food is less than the cost of sales for beverages.

Question 35

Explain what it means to analyze a statement of income systematically and how one goes about it, from the first step to the last.

Question 36

Explain the problems facing restaurants when it comes to deciding how much inventory to stock.

Question 37

The shows the financial situation for the business at a particular point in time, usually December 31.

Question 38

Most restaurants choose to take a physical inventory once a month.