Question 1

An owner is building a new operation and calculates that it can achieve $400 in sales per square foot built. The own feels that to achieve a desired 18 percent ROI the operation must generate $1,100,000 in annual revenue. How large should the owner's new facility be to generate the desired level of annual revenue?

Accepted Answer

To achieve the desired annual revenue of $1,100,000 with $400 in sales per square foot, divide the total desired revenue by the sales per square foot: $1,100,000 / $400 = 2,750 square feet.

Question 2

An operation had sales of $39,000 in an accounting period. The operation's food cost for the period was 38 percent. The operation spent $6,000 on meat in the period. What was the operation's meat cost percentage for the period?

Accepted Answer

To find the meat cost percentage, divide the meat cost by the total sales and multiply by 100. So, ($6,000 / $39,000) * 100 = 15.38%. However, the closest option is 16.7%, which suggests a rounding or approximation error in the options provided.

Question 3

In most food service operations, when actual revenue is lower than budgeted revenue, the operations' fixed cost percentages

Accepted Answer

When actual revenue is lower than budgeted, the fixed costs (which do not change with the level of output or sales) represent a higher percentage of the lower revenue, making option D correct.

Question 4

What is the area of least concern for managers who are carefully monitoring their budgets?

Accepted Answer

Fixed costs remain constant regardless of the level of production or sales, so they are of less concern for managers who are closely monitoring budgets, as they do not change with the level of business activity.

Question 5

A primary purpose of budgets is to help managers estimate future operating results.

Accepted Answer

Budgets are used as a tool by managers to forecast future income and expenses, helping them plan and estimate future financial performance and operating results.

Question 6

A criticism of using the contribution margin method of menu analysis is that it tends to favor higher-priced menu items over lower-priced menu items.

Accepted Answer

The contribution margin method focuses on the actual dollar amount each menu item contributes to overall profit, which often results in higher-priced items appearing more favorable because they typically have higher contribution margins, even if their percentage cost is the same or higher than lower-priced items.

Question 7

Popularity is a factor utilized when performing both food cost percentage and contribution margin matrix analysis.

Accepted Answer

Popularity is considered in both food cost percentage and contribution margin matrix analysis to evaluate menu items' performance and profitability.

Question 8

Goal value menu analysis is performed using a 2x2 matrix to indicate menu item characteristics that are above and below the overall menu's average values.

Accepted Answer

The answer of Goal value menu analysis is performed using...

Question 9

Cost/Volume/Profit (CVP) analysis is also referred to as break-even analysis.

Accepted Answer

CVP analysis is indeed often referred to as break-even analysis because it helps determine the point at which a business neither makes a profit nor incurs a loss, known as the break-even point.

Question 10

The formula used to calculate a break-even point in sales is: Fixed costs (÷) Contribution margin % = Break-even point in sales.

Accepted Answer

The break-even point in sales is calculated by dividing the fixed costs by the contribution margin percentage, which represents the portion of each sale that contributes to covering fixed costs after variable costs have been deducted.

Question 11

One primary goal of a long-range budget is to communicate to its owners and investors a realistic picture of a business's future financial performance.

Accepted Answer

A long-range budget is designed to outline a company's financial direction and expectations over an extended period, typically spanning several years, to provide owners, investors, and other stakeholders with a clear understanding of its future financial performance and strategic goals.

Question 12

Achievement budgets are typically prepared for a period of two to five years into the future and provide a long-term view about the direction of a business.

Accepted Answer

Achievement budgets are not a recognized term in financial planning or accounting. Instead, budgets are typically categorized by their purposes, such as operating budgets, capital budgets, and cash flow budgets, and can cover various time frames, often annually or for a specific project duration. Long-term financial planning might involve projections or forecasts rather than "achievement budgets."

Question 13

Managers who forecast increases in revenue should also forecast increases in their variable cost percentages.

Accepted Answer

Variable costs are costs that change in proportion to the level of goods or services a company produces. An increase in revenue does not necessarily mean that the variable cost percentages will increase; it means that the total variable costs will likely increase, but the percentage of variable costs relative to sales can remain constant or even decrease due to economies of scale or improved efficiency.

Question 14

Managers who forecast decreases in revenue should also forecast decreases in their fixed cost percentages.

Accepted Answer

Fixed costs are typically constant and do not change with the level of output or revenue. Therefore, a decrease in revenue does not automatically lead to a decrease in the percentage of fixed costs.

Quiz 10: Planning for Profit