Question 1

What is an essential difference between a forecast and a budget?&#10;A) Forecasts are made once a year, budgets are made each relevant accounting period&#10;B) Forecasts express market expectations, budgets express business objectives&#10;C) Forecasts are made on a &#34;rolling&#34; basis; budgets are based on historical performance&#10;D) Forecasts are drawn up after and based on budgets

Accepted Answer

A forecast is an estimate of future market conditions and expectations, while a budget is a plan for achieving specific business objectives. Forecasts are based on external factors such as market trends, customer behavior, and economic conditions, while budgets are based on internal factors such as past performance, available resources, and strategic goals.

Question 2

A local business college has 600 students and 60 employees. In recent years, due to the increasing popularity of the programs, the classrooms and lecture theatres have been becoming increasingly crowded. Next year, the number of students is expected to increase to 700 students, requiring the employment an an extra 6 staff and delivery of some classes in the evenings. Student numbers are expected to increase to 1,000 within the next 5 years. The Board of Governers have decided to extend the current building in order to cope with this increase in numbers. The cost of this extension is expected to be €35m. This is an example of:

A) Variable costs being fixed and fixed costs being variable
B) Semi-variable or mixed costs
C) Step costs
D) Absorption costing

C

Accepted Answer

The cost of the building extension is an example of step costs, which are fixed costs that increase in steps as production or activity levels increase. The increase in student numbers has caused the Board of Governers to take a step in increasing the capacity of the college by extending the building, resulting in a significant increase in fixed costs. Therefore, the correct answer is C. Option A is incorrect because there is no indication that the variable costs have become fixed costs or vice versa. Option B is incorrect because semi-variable costs have both fixed and variable components, but there is no indication of such mixed costs in the scenario. Option D is incorrect because absorption costing is a method of costing that includes both fixed and variable costs in the cost of producing a product or service, and this scenario does not involve the production of goods or services.

Question 3

What is a discretionary fixed cost?&#10;A) A cost that be traced to a specific cost driver&#10;B) A cost that can be traced to a specific cost object&#10;C) A cost incurred as the result of a major change in customer behaviour&#10;D) A cost that management can decide to forego

Accepted Answer

A discretionary fixed cost is a cost that management can choose to incur or not incur. It is usually a fixed cost that is not directly tied to any particular cost object or activity, and can be adjusted or eliminated at the discretion of management. Examples include advertising and research and development expenses.

Question 4

In what order are the following reports drawn up?&#10;A) Operating budget, cash budget, sales forecast&#10;B) Cash budget, sales forecast, operating budget&#10;C) Sales forecast, operating budget, cash budget

Accepted Answer

The correct order starts with the sales forecast, as it estimates future sales and is essential for making further budgeting decisions. Based on the sales forecast, the operating budget is prepared, which includes all the revenues and expenses for daily operations. Finally, the cash budget is drawn up, which outlines the inflows and outflows of cash, relying on information from the sales forecast and operating budget.

Question 5

The Rooms director of the Swansea Best Western is preparing a rooms budget for 2018. Estimated rooms occupancy: 80%; Number of keys: 100; Average Daily Rate (ADR): $67.50; Variable Labour: $5 per sold room, Fixed (Annual) Labour: $100,000; Other expenses: $2.50 per sold room. What is the budgeted Rooms departmental profit for the year?

A) 1652000
B) 1744345
C) 1885457
D) 1925256

Accepted Answer

The answer of The Rooms director of the Swansea Best...

Question 6

Accepted Answer

This is known as the 1/3 rule, where food cost and labor cost should ideally be 1/3 of revenue each, leaving 1/3 for other expenses and profit.

Question 7

Consider the following two statements from F&B management practice: i) Normally, a F&B Manager is expected to stay within 3% of their targeted food cost, ii) Actual food cost being under budget could be cause for concern. Which of these statements are true?

A) Only i) is true
B) Only ii) is true
C) Both i) and ii) are true
D) Neither i) or ii) are true

Accepted Answer

Both statements are true. A F&B Manager is indeed expected to maintain food costs within a tight margin of their target, typically around 3%, to ensure profitability and efficient resource use. Additionally, actual food costs being under budget can signal issues such as underportioning, poor quality ingredients, or menu pricing errors, which could negatively impact customer satisfaction and the establishment's reputation.

Question 8

A business starts the accounting period with 4,000 in local currency in cash. The following facts are known about the period: real estate depreciation of 1,000; combined debt service payment to bank of 3,500 (2,500 interest and 1,000 installment); receipt of 500 from accounts receiveable from the previous quarter; 5,500 in cash sales; 2,000 in credit sales. Calculate the amount of cash at the end of the quarter.

A) 5500
B) 6500
C) 7500
D) 8000

Accepted Answer

The answer of A business starts the accounting period with...

Question 9

Expenses can be linked to:&#10;A) Past cash disbursements&#10;B) Future cash disbursements&#10;C) Both&#10;D) Neither - the two phenomena are unrelated

Accepted Answer

Expenses can be linked to both past and future cash disbursements. Past cash disbursements would include expenses that have already been paid for, such as rent or utility bills. Future cash disbursements would include expenses that have been planned for but not yet paid, such as upcoming rent payments or anticipated contract payments. Therefore, expenses can be linked to both past and future cash disbursements.

Question 10

What is the objective of engagnig in variance analysis?&#10;A) To hold managers and staff accountable&#10;B) To benchmark against competitors&#10;C) To gain better understanding of performance

Accepted Answer

The objective of variance analysis is to gain a better understanding of performance by comparing actual results against budgeted or expected results. While holding managers and staff accountable and benchmarking against competitors may be secondary benefits of variance analysis, the primary objective is to analyze and understand the reasons for variances in order to improve future performance.

Question 11

The Lucky Inn budgeted revenue of $12,000 during a period when $10,000 was actually generated. What was the percentage variance for the period?&#10;A) 16.7% favourable&#10;B) 16.7% unfavourable&#10;C) 20.0% unfavourable&#10;D) 20.0% favourable

Accepted Answer

The answer of The Lucky Inn budgeted revenue of $12,000...

Question 12

The maintenance department of the Royal Air Force Club calculate that the standard direct labour cost of painting 10 square meters of the building's external walls of is 1 hour of labour at £16 per hour. During the 12-week summer season, they painted 20,000 square meters and the direct labour cost was £29,250 for 2,250 hours of work. What is the Total Direct Labour Cost Variance?

A) 2750
B) 4350
C) 6400
D) 8150

Accepted Answer

The answer of The maintenance department of the Royal Air...

Question 13

What is the total flexible variable cost variance (&#34;Level 2&#34;), assuming all variable expenses are materials-related?&#10;A) The difference between the quantity of materials that should have been used and what was actually used, valued at the standard cost per unit of material&#10;B) The difference between the quantity of materials that should have been used and what was actually used, valued at the actual cost per unit of material&#10;C) The difference between what the actual sales volume was and what it should have been, valued at the standard price&#10;D) The difference between what the materials actually cost and what they should have cost, split into direct material price variance and direct material quantity variance

Accepted Answer

The answer of What is the total flexible variable cost...

Question 14

What is the difference between the actual amounts and the flexible amounts for the actual output achieved called?&#10;A) Production volume variance&#10;B) Flexible budget variance&#10;C) Sales volume variance&#10;D) Non-standard cost variance

Accepted Answer

The answer of What is the difference between the actual...

Question 15

For the first week of May, a hotel club budgeted for 600 room nights at an average room rate of €65. Actual room nights for the week totalled 500, at an average room rate of €70. The price variance for the week was ______ and the quantity variance for the week was ______?

A) €500 favourable; €3,000 unfavourable
B) €2,500 favourable; €6,500 unfavourable
C) €4,000 unfavourable; €4,000 favourable
D) €7,000 unfavourable; €500 favourable

Unlock Deck

Unlock for access to all 15 flashcards in this deck.

Unlock Deck

k this deck

Accepted Answer

The answer of For the first week of May, a...

Deck 4: Finance Accounting in Food and Beverage