Deck 4: Operations Budgeting and Cost-Volume-Profit Analysis

Question 1

At the Virtual Café, the average price per meal sold is $15 with an average variable cost of $7. Fixed costs for July are expected to be $30,000. If the restaurant manager expects to sell 5,000 meals in July, the net income (or loss) for the month would be:

A) $25,000 net income.
B) $10,000 net income.
C) $0 (break­even).
D) $10,000 net loss.

Answer 1

B

Question 2

Which of the following is most likely to be classified as a variable cost?

A) general manager's salary
B) rent expense
C) property taxes
D) food costs

Answer 2

D

Question 3

The Night Owl Restaurant expects to sell 6,000 meals during the upcoming month with an average variable cost per meal sold of $6. Total fixed costs are expected to be $24,000. The average selling price per meal sold at the break­even point would be:

A) $4.
B) $6.
C) $8.
D) $10.

Answer 3

D

Question 4

At the 120­seat Riverside Restaurant, total variable costs for September were $12,000. For October, the manager expects to sell 10 percent more meals than in September. If the increase in sales volume occurs, the manager should expect the total fixed costs for October to be:

A) lower than in September.
B) higher than in September.
C) relatively the same as in September.
D) impossible to forecast with any accuracy.

Question 5

The first step in the process for budgeting for food and beverage operations is to:

A) set profit requirements.
B) project revenues.
C) estimate expenses.
D) predict cash needs.

Question 6

Costs that remain constant in the short term, even though sales volume may vary, are called __________ costs.

A) variable
B) mixed
C) allocated
D) fixed

Question 7

The Daylight Diner expects to sell 6,000 meals during the upcoming month with an average variable cost per meal sold of $6. If total fixed costs are expected to be $24,000, what would the average selling price per meal sold be if the operation is to meet its $12,000 profit goal for the month?

A) $6
B) $8
C) $10
D) $12

Question 8

Using the percentage method for estimating expenses, if the current beverage cost is 20 percent and projected beverage revenue is $60,000, the estimated beverage cost in dollars for the new budget period would be:

A) $12,000.
B) $48,000.
C) $72,000.
D) $80,000.

Question 9

When revenues are being projected, which of the following factors assumes that past trends are good predictors of future growth?

A) revenue history
B) unusual events such as roadwork or renovation
C) competitive analysis
D) expense history

Question 10

Which of the following budgeting processes ensures that plans are specifically geared to individual operations within multi­unit food service companies?

A) reforecasting
B) bottom­up budgeting
C) top­down budgeting
D) mark­up budgeting