Deck 10: Planning for Profit

Question 1

The purpose of menu analysis is to determine the

A) number of different items to offer on a menu.
B) selling prices of the individual items offered on a menu.
C) profitability of the individual items offered on a menu.
D) order of placement of the individual items offered on a menu.

Answer 1

C

Question 2

The primary purpose of Cost/Volume/Profit (CVP) analysis is to

A) forecast future sales more accurately.
B) find out which menu items are most profitable.
C) estimate an operation's income before income taxes.
D) identify the amount of sales revenue needed to avoid an operating loss.

Answer 2

D

Question 3

How many different menu item classifications will result if managers evaluate their menu items' popularity and food cost percentages by using a two factor matrix analysis?

A) 2
B) 4
C) 6
D) 8

Answer 3

B

Question 4

What is the goal of managers who use matrix analysis to evaluate menu items based on each item's popularity and food cost percentage?

A) Increase sales
B) Maximize contribution margin
C) Minimize food cost percentage
D) Decrease controllable other expenses

Question 5

What type of menu item should be featured prominently on the menu if managers use matrix analysis to evaluate their menus based on item popularity and contribution margin?

A) An item with low contribution margin and low popularity
B) An item with high contribution margin and low popularity
C) An item with low contribution margin and high popularity
D) An item with high contribution margin and high popularity

Question 6

Which type of menu item should be removed from the menu if managers use matrix analysis to evaluate their menus based on item popularity and contribution margin?

A) An item with low contribution margin and low popularity
B) An item with high contribution margin and low popularity
C) An item with low contribution margin and high popularity
D) An item with high contribution margin and high popularity

Question 7

A manager utilizes contribution margin matrix analysis to evaluate a menu. What would be a good marketing strategy to use on an item the manger finds is very popular but has a low contribution margin?

A) Promote the item well
B) Reduce the item's price
C) Remove the item from the menu
D) Reduce the item's prominence on the menu

Question 8

A menu item sells for $8.00, has a food cost of 25%, and it is sold to 100 guests. What is the item's total contribution margin?

A) $200
B) $300
C) $600
D) $700

Question 9

The tendency to favor high-priced menu items over low-priced ones during menu evaluation is a legitimate criticism of

A) goal value analysis.
B) Cost/Volume/Profit (CVP) analysis.
C) contribution margin matrix analysis.
D) food cost percentage matrix analysis.

Question 10

A menu item sells for $11.95 and has a 40 percent food cost. Variable costs for the item are 25 percent and 250 servings are sold. What is the item's goal value?

A) 435.98
B) 543.23
C) 590.34
D) 627.38

Question 11

A loss leader is a menu item that is priced very low, and sometimes even below its total cost, for the purpose of

A) increasing total revenue.
B) increasing contribution margin.
C) decreasing food cost percentage.
D) decreasing variable costs percentage.

Question 12

When an operation reaches its break-even point the operation's revenue will equal its

A) fixed expenses.
B) variable expenses.
C) controllable expenses.
D) fixed plus variable expenses.

Question 13

A restaurant has a check average of $12 and variable costs per cover of $4.80. If its fixed costs are $36,000 each month, what is the number of covers that must be sold to reach its monthly break-even point?

A) 1500
B) 3750
C) 4500
D) 5000

Question 14

What is the formula managers use to calculate their contribution margin for overall operation?

A) Total sales + Variable costs = Contribution margin for overall operation
B) Total sales x Variable costs = Contribution margin for overall operation
C) Total sales ÷ Variable costs = Contribution margin for overall operation
D) Total sales - Variable costs = Contribution margin for overall operation

Question 15

Experienced food service managers know that their budgets

A) cannot be modified.
B) are static documents.
C) should not be modified.
D) are not static documents.

Question 16

What is the type of budget that would include the least amount of detail about an operation's revenue and operating expenses?

A) Annual budget
B) Long-range budget
C) Comparison budget
D) Achievement budget

Question 17

Last year a health care facility served 36,500 dinners. The manager of the facility estimates an increase of 5 percent in the number of dinners to be served this year. What will be the manager's estimate of the number of dinners the facility will serve this year?

A) 37,325
B) 38,325
C) 39,325
D) 40,325

Question 18

Last year an operation achieved a 35 percent food cost on sales of $800,000. For this year, the operation's manager anticipates a 5 percent increase in the prices the operation will pay for food. What should the manager estimate next year's food cost percentage to be if the operation does not raise its menu prices?

A) 36.00%
B) 36.75%
C) 40.00%
D) 40.75%

Question 19

Last year an operation achieved a 28 percent labor cost on sales of $1,500,000. For next year, the manager predicts an 8 percent increase in the prices the operation will pay for labor. The manager will also increase the operation's menu prices by 5 percent. What should be the manager's best estimate for next year's labor cost percentage?

A) 28.8%
B) 29.8%
C) 30.8%
D) 31.8%

Question 20

A manager budgeted $6,000 for kitchen equipment repairs this year. So far this year, the manager has spent $1,830 on these repairs. What percentage of the kitchen equipment repair budget has now been spent by the manager?

A) 30.5%
B) 32%
C) 34.5%
D) 36%

Question 21

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?

A) 2,000 square feet
B) 2,750 square feet
C) 3,250 square feet
D) 4,000 square feet

Question 22

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?

A) 12.74%
B) 14.7%
C) 16.7%
D) 18.7%

Question 23

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

A) will not change.
B) will be lower than budgeted.
C) will be exactly as budgeted.
D) will be higher than budgeted.

Question 24

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

A) Profits
B) Revenue
C) Fixed costs
D) Variable costs

Question 25

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

Question 26

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.

Question 27

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

Question 28

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.

Question 29

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

Question 30

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

Question 31

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.

Question 32

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.

Question 33

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

Question 34

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