Deck 5: Finance and Accounting

Question 1

Define variable and fixed costs and name three components of each.

Answer 1

A variable cost is a cost that fluctuates with sales and is expressed in terms of percentage of sales.Areas that are considered variable are hourly labor, linen cost, equipment repairs, building repairs, credit card expense, advertising, manager bonus, training cost, kitchen smallwares/ supplies, front of house smallwares/supplies, dish washer supplies, bath- room supplies, telephone calls, miscellaneous, postage expense, paper supplies, general and office supplies, computer supplies, china, silver- ware, glassware, menus/printing, and uniforms.
Fixed costs are known costs and usually remain fixed throughout the year.Fixed costs are expressed in dollar terms and will not fluctuate with an increase or decrease in sales volume.Fixed costs include rent or mortgage, property taxes, insurance costs, management payroll, con- tracted maintenance, loan payments, and utilities.(Utilities can be managed and controlled.However, utility costs will most likely remain within a certain range and therefore can be planned.)

Question 2

List three of the most committed violations in reporting to the
IRS.

Answer 2

a.deliberately underreporting or omitting income b.overstating the amount of deductions
c.keeping two sets of books
d.making false entries in books and records
e.claiming personal expenses as business expenses f.claiming false deductions
g.failing to pay employment taxes to the IRS
h.hiding or transferring assets or income

Question 3

What is the accrual method of accounting?

Answer 3

Sales and expenses are accounted for once incurred and not when cash exchanges hands.

Question 4

Define the following:

Question 5

Define the break-even sales point of a business.

Question 6

What is the formula for calculating food cost?

Question 7

What information does the profit and loss (P&L) statement pro- vide to a business owner?

Question 8

Explain a declining budget.

Question 9

What does the balance sheet consist of?

Question 10

What does COGS stand for and how is it calculated?

Question 11

Are the following fixed or variable costs?