Question 1

Which of the following sources of information is the least reliable basis for developing cost standards for a food and beverage operation?&#10;A) industry averages&#10;B) past financial statements&#10;C) operating budgets&#10;D) in&#173;house standard costs

Accepted Answer

Industry averages may not take into account the specific characteristics and needs of the particular food and beverage operation, and may not be an accurate reflection of the costs involved. Past financial statements, operating budgets, and in-house standard costs are generally more reliable sources of information for developing cost standards.

Question 2

Computer technology helps managers in their control efforts by:&#10;A) enabling them to produce timely computer&#173;generated reports.&#10;B) taking over decision&#173;making responsibilities from them.&#10;C) helping them &#34;crunch the numbers.&#34;&#10;D) enabling them to produce timely computer&#173;generated reports and helping them &#34;crunch the numbers.&#34;

Accepted Answer

Computer technology helps managers in their control efforts by enabling them to produce timely computer-generated reports and by helping them "crunch the numbers." With the help of computer technology, managers can quickly analyze data, identify trends and patterns, and make informed decisions based on the information they have. They can also use computer technology to automate routine tasks, freeing up time to focus on more important issues. Overall, computer technology provides managers with a valuable tool for controlling and optimizing their operations.

Question 3

When evaluating the effectiveness of actions taken to correct a cost control problem, it is important that managers:&#10;A) do not evaluate too soon after taking corrective action.&#10;B) choose an appropriate time frame for the evaluation.&#10;C) determine whether another part of the control system has been negatively affected by the corrective action taken.&#10;D) all of the above

Accepted Answer

All of the options are important. Managers need to give enough time for the corrective action to take effect and show results, so they should not evaluate too soon. They also need to choose an appropriate time frame for the evaluation, depending on the nature of the problem and the complexity of the solution. Finally, managers need to consider the potential side effects of the corrective action and ensure that it does not negatively affect other parts of the control system.

Question 4

Managers at the ABC Restaurant have uncovered a problem: food costs have been too high for two months in a row. The restaurant's managers are trying to decide who should be given the responsibility for taking corrective action. One question the managers should ask themselves before assigning responsibility is:

A) How important is the problem?
B) How specialized is the problem?
C) Who is responsible for the area of concern?
D) All of the above

Accepted Answer

Before assigning responsibility for taking corrective action, the restaurant's managers should consider all of the above questions: how important the problem is, how specialized the problem is, and who is responsible for the area of concern. By considering these factors, the managers can make a more informed decision about who should be responsible for taking corrective action and how to address the issue effectively.

Question 5

For the previous month, actual food costs exceeded standard food costs at Buddy's Bar & Grill. Which of the following could have caused the variance?&#10;A) a significant change in the sales mix, with guests ordering menu items having high contribution margins&#10;B) smaller portion sizes prepared by food production staff&#10;C) food production staff using higher quality ingredients than called for by standard recipes&#10;D) price cuts by suppliers during the month that weren't reflected in the selling prices of affected menu items

Accepted Answer

Using higher quality ingredients than called for by standard recipes could have caused actual food costs to exceed standard food costs at Buddy's Bar & Grill. This is because the cost of higher quality ingredients could be higher than what is budgeted for in standard recipes. Other factors listed, such as a change in sales mix or price cuts by suppliers, could potentially have an impact on food costs, but there is not enough information provided to determine if they caused the variance. Smaller portion sizes prepared by food production staff could potentially reduce food costs, so it wouldn't be the cause of actual costs exceeding standard costs.

Question 6

Last month at Emil's Italian Restaurant, actual food costs fell below standard food costs. Which of the following could be the reason?&#10;A) failure to collect all revenue due&#10;B) food production staff substituting lower quality ingredients than called for by standard recipes&#10;C) larger portion sizes prepared by food production staff&#10;D) higher prices charged by suppliers during the month that weren't reflected in the selling prices of affected menu items

Accepted Answer

Substituting lower quality ingredients than those specified in standard recipes can lead to a decrease in actual food costs compared to standard food costs, as lower quality ingredients are typically less expensive.

Question 7

Year after year, the As&#173;You&#173;Like&#173;It Bistro handles a large volume of business at lunch. The manager attributes the operation's success to radical menu changes every three months. Many of the new menu items result from suggestions made by guests. Which of the following sources of information offers the manager the most reliable basis for developing cost standards?&#10;A) industry averages&#10;B) past financial statements&#10;C) operating budgets&#10;D) in&#173;house standard costs

Accepted Answer

In-house standard costs are the most reliable basis for developing cost standards because they are tailored to the specific operations and ingredients used by the As-You-Like-It Bistro. Using industry averages, past financial statements, or operating budgets may not accurately reflect the unique characteristics of the restaurant's menu and operations. Guests' suggestions may also be considered, but they may not provide a complete picture of the cost and feasibility of new menu items.

Question 8

The easiest&#173;to&#173;use source of information for standard (expected) food and beverage costs is:&#10;A) industry averages.&#10;B) past financial statements.&#10;C) operating budgets.&#10;D) in&#173;house standard costs.

Accepted Answer

Industry averages provide a benchmark for standard food and beverage costs and are easily accessible through industry associations or publications. Past financial statements and operating budgets may provide some insight, but they are specific to the individual business and may not reflect industry norms. In-house standard costs may be useful but require significant time and resources to develop.

Question 9

When actual costs vary from standard costs, corrective action:&#10;A) may be necessary.&#10;B) is always necessary.&#10;C) is necessary only if the variance exceeds 5 percent.&#10;D) is necessary only if the variance exceeds $3,000.

Accepted Answer

Corrective action may be necessary when actual costs vary from standard costs, regardless of the magnitude of the variance. The need for corrective action will depend on the cause of the variance and the impact it has on the organization's goals and objectives.

Question 10

The management team at the Four Corners Restaurant has agreed that only cost variances in excess of $1,000 a month would be analyzed and corrected. Given the following information, which segment of the operation signals the need for analysis and corrective action? $\begin{array}{ l c c } &\text { July Revenue}&\text { Cost Variance }\\\text { Breakfast } & \$ 12,000 & 7 \% \\\text { Lunch } & \$ 35,000 & 4 \% \\\text { Dinner } & \$ 85,000 & 1 \% \\\text { Beverage Operation } & \$ 45,000 & 2 \%\end{array}$

A) breakfast
B) lunch
C) dinner
D) beverage operation

Accepted Answer

The answer of The management team at the Four Corners...

Deck 10: Control: Analysis, Corrective Action,and Evaluation