Deck 13: Menu Analysis and Planning for Sales

Question 1

The gross-profit theory of menu analysis states that profits are maximized through the correct combinations of selling prices, costs, and sales counts.

Answer 1

True

Question 2

If two products are competing against each other-say, a mushroom burger versus a chili burger-the cross-price elasticity is negative.

Answer 2

False

Question 3

The logical weakness of cost plus markup pricing is that price is not considered a function of cost.

Answer 3

False

Question 4

Menu engineering refers to items that are high in both popularity and contribution margin as:

A) stars
B) plowhorses
C) puzzles
D) dogs

Question 5

Menu engineering should be used to help determine the placement of items on the menu.

Question 6

The most popular measure of the impact of price on sales is:

A) demand elasticity
B) homogeneously competitive
C) competitive pricing
D) follow-the-leader pricing

Question 7

The impact of elasticity on demand is mostly felt in a homogeneously competitive environment.

Question 8

Typical menu pricing strategies include all the following except:

A) intuition
B) competitive pricing
C) menu engineering pricing
D) quantum analysis pricing

Question 9

Establishing prices based on _____ can result in failure to recover full costs, or in an unsatisfactory and unpredictable profit margin.

A) competitive pricing
B) intuition pricing
C) cost plus pricing
D) psychological Pricing

Question 10

Cost plus markup pricing also could lead to an irrational pricing policy, if the price is based on total average cost as opposed to direct product cost.

Question 11

Revenue has nothing to do with pricing strategies.

Question 12

A menu designed solely from the perspective of achieving the lowest overall food cost percentages will cause the operation to sacrifice total sales revenues.

Question 13

Before attempting price revision, which of the following questions should the manager answer?

A) Have prices changed recently? If yes, what effect on the volume of sales could be attributable to the price changes?
B) Is there a noticeable long-term trend in prices, and if so, what is it?
C) What types and amounts of discounts are in place in your restaurant?
D) All answers are correct

Question 14

As the contribution margin of an item increases, the food cost percentage decreases.

Question 15

What should the potential food cost (in dollars) at the Inn have been given the following sales mix? Potential
Item Number Sold Selling Price Food Cost %
Rib-Eye Steaks 2,000 $23.75 25 %
Fish 1,000 $28.00 32 %
Chicken 1,500 $21.50 20 %

A) $28,285
B) $27,599
C) $27,285
D) $29,000

Question 16

Pricing strategy for a new product or a new menu that has no history of sales data is commonly referred to as:

A) competitive pricing
B) follow-the-leader pricing
C) psychological pricing
D) buffet pricing

Question 17

What should the potential food cost (in percentage) at the Inn have been given the following sales mix? Potential
Item Number Sold Selling Price Food Cost %
Rib-Eye Steaks 2,000 $23.75 25 %
Fish 1,000 $28.00 32 %
Chicken 1,500 $21.50 20 %

A) 25.9%
B) 25.3%
C) 24.3%
D) 33.3%

Question 18

Higher contribution margins will generate higher profitability:

A) if the number of items sold does not decrease
B) always
C) never
D) if price elasticity is greater

Question 19

Target food cost refers to the ideal amount of cost your company hopes to spend for the menu item.

Question 20

Menu engineering refers to items that are highly popular but less than average in contribution margin as:

A) stars
B) plowhorses
C) puzzles
D) dogs

Question 21

What are the advantages of using menu engineering?

Question 22

What impact do your potential customers have on the item selections and pricing of the menu?

Question 23

What is price elasticity and why should it be considered when setting menu prices?

Question 24

What is the formula for deriving price elasticity of demand?

Question 25

What is the danger of focusing too heavily on food cost percentages?

Question 26

What should the potential food cost (in percentage) at the Inn have been given the following sales mix?
Potential
Item Number Sold Selling Price Food Cost %
Rib-Eye Steaks 1,000 $23.75 25%
Fish 2,000 $28.00 32%
Chicken 1,500 $21.50 20%

Question 27

What is the distinction between markup rate and percentage margin?

Question 28

What is inelastic?

Question 29

What is sales mix?

Question 30

What should the potential food cost (in dollars) at the Inn have been given the following sales mix?
Potential
Item Number Sold Selling Price Food Cost %
Rib-Eye Steaks 1,000 $23.75 25%
Fish 2,000 $28.00 32%
Chicken 1,500 $21.50 20%