Chapter 10: Control: Analysis, Corrective Action, And Evaluation

1. Computer technology helps managers in their control efforts by:

Enabling them to produce timely computer-generated reports

Taking over decision-making responsibilities from them

Helping them “crunch the numbers”

A and C

Computer technology helps managers in their control efforts by enabling them to produce timely computer-generated reports and helping them "crunch the numbers." This means that computer technology allows managers to generate reports quickly and efficiently, providing them with the necessary information to make informed decisions. Additionally, computer technology helps managers analyze and interpret data through data analysis tools, allowing them to make more accurate and effective decisions. Therefore, options A and C are both correct as they highlight the ways in which computer technology supports managers in their control efforts.

Explanation

Computer technology helps managers in their control efforts by enabling them to produce timely computer-generated reports and helping them "crunch the numbers." This means that computer technology allows managers to generate reports quickly and efficiently, providing them with the necessary information to make informed decisions. Additionally, computer technology helps managers analyze and interpret data through data analysis tools, allowing them to make more accurate and effective decisions. Therefore, options A and C are both correct as they highlight the ways in which computer technology supports managers in their control efforts.

2. The easiest to use source of information for standard (expected) food and beverage costs is:

Industry averages

Past financial statements

Operating budget

In-house standard costs

Industry averages are the easiest to use source of information for standard food and beverage costs because they provide a benchmark for comparison against other businesses in the same industry. By comparing the costs of food and beverages to industry averages, businesses can determine if their costs are in line with what is typically expected. This information can help businesses identify areas where they may be overspending or where they can make improvements to increase profitability. Additionally, industry averages are readily available and can be easily accessed through industry publications or online resources.

Explanation

Industry averages are the easiest to use source of information for standard food and beverage costs because they provide a benchmark for comparison against other businesses in the same industry. By comparing the costs of food and beverages to industry averages, businesses can determine if their costs are in line with what is typically expected. This information can help businesses identify areas where they may be overspending or where they can make improvements to increase profitability. Additionally, industry averages are readily available and can be easily accessed through industry publications or online resources.

3. When evaluating the effectiveness of actions taken to correct a cost control problem, it is important that managers:

Do not evaluate too soon after corrective action

Choose an appropriate time frame for the evaluation

Determine whether another part of control system has been negatively affected by the corrective action taken

All of the above

Managers should not evaluate too soon after corrective action because it takes time for the effects of the action to be fully realized and for any adjustments to be made. Choosing an appropriate time frame for evaluation is important because different actions may have different time frames for their effects to be seen. Additionally, managers should determine whether another part of the control system has been negatively affected by the corrective action taken to ensure that overall cost control is maintained. Therefore, all of the above options are important considerations when evaluating the effectiveness of actions taken to correct a cost control problem.

Explanation

Managers should not evaluate too soon after corrective action because it takes time for the effects of the action to be fully realized and for any adjustments to be made. Choosing an appropriate time frame for evaluation is important because different actions may have different time frames for their effects to be seen. Additionally, managers should determine whether another part of the control system has been negatively affected by the corrective action taken to ensure that overall cost control is maintained. Therefore, all of the above options are important considerations when evaluating the effectiveness of actions taken to correct a cost control problem.

4. Last month at Emil's Italian Restaurant, actual food costs fell below standard food costs. Which of the following could be the reason?

Failure to collect all revenue

Food production staff substituting lower quality ingredients than called for by standard recipes

Larger portion sizes prepared by food production staff

Higher prices charged by suppliers during the month that weren’t reflected in the selling prices of affected menu items

The reason why actual food costs fell below standard food costs could be because the food production staff substituted lower quality ingredients than called for by standard recipes. This means that they used cheaper ingredients which resulted in lower costs.

Explanation

The reason why actual food costs fell below standard food costs could be because the food production staff substituted lower quality ingredients than called for by standard recipes. This means that they used cheaper ingredients which resulted in lower costs.

5. Which of the following sources of information is the least reliable basis for developing cost standards for a food and beverage operation?

Industry averages

Past financial statements

Operating budgets

In-house standard costs

Industry averages are the least reliable source of information for developing cost standards for a food and beverage operation. This is because industry averages represent a broad range of businesses and may not accurately reflect the specific circumstances and operations of a particular establishment. Past financial statements, operating budgets, and in-house standard costs are more reliable sources as they provide information specific to the business in question and can be used to analyze and make more accurate cost projections.

Explanation

Industry averages are the least reliable source of information for developing cost standards for a food and beverage operation. This is because industry averages represent a broad range of businesses and may not accurately reflect the specific circumstances and operations of a particular establishment. Past financial statements, operating budgets, and in-house standard costs are more reliable sources as they provide information specific to the business in question and can be used to analyze and make more accurate cost projections.

6. Managers at the ABC Restaurant have uncovered a problem: food costs have been too high for two months in a row. The restaurant's managers are trying to decide who should be given the responsibility for taking corrective action. One question the managers should ask themselves before assigning responsibility is:

How important is the problem?

How specialized is the problem?

Who is responsible for the area of concern?

All of the above

The managers should ask themselves all of the above questions before assigning responsibility for taking corrective action. By considering how important the problem is, they can determine the urgency and priority of addressing it. Assessing how specialized the problem is can help them identify the specific skills and expertise required to tackle it effectively. Finally, determining who is responsible for the area of concern is crucial in ensuring accountability and assigning the task to the appropriate individual or team.

Explanation

The managers should ask themselves all of the above questions before assigning responsibility for taking corrective action. By considering how important the problem is, they can determine the urgency and priority of addressing it. Assessing how specialized the problem is can help them identify the specific skills and expertise required to tackle it effectively. Finally, determining who is responsible for the area of concern is crucial in ensuring accountability and assigning the task to the appropriate individual or team.

7. The management team at the Four Corners restaurant has agreed that only variances in excess of $1,000 a month would be analyzed and corrected. Given the following information, which segment of the operation signals the need for analysis and corrective action? July revenue Cost variance Breakfast $12,000 7% Lunch $35,000 4% Dinner $85,000 1% Beverage operation $45,000 2%

Breakfast

Lunch

Dinner

Beverage operation

The segment of the operation that signals the need for analysis and corrective action is lunch. This is because the cost variance for lunch is 4%, which exceeds the agreed-upon threshold of $1,000. The variances for breakfast, dinner, and the beverage operation are all below this threshold, indicating that they do not require further analysis and corrective action.

Explanation

The segment of the operation that signals the need for analysis and corrective action is lunch. This is because the cost variance for lunch is 4%, which exceeds the agreed-upon threshold of $1,000. The variances for breakfast, dinner, and the beverage operation are all below this threshold, indicating that they do not require further analysis and corrective action.

8. When actual costs vary from standard costs, corrective action:

May be necessary

Is always necessary

Is necessary only if the variance exceeds five percent

Is necessary only if the variance exceeds $3,000

When actual costs vary from standard costs, corrective action may be necessary. This is because any deviation from the standard costs could indicate a problem or inefficiency in the production process. However, the necessity of corrective action may vary depending on the magnitude of the variance. It is not always necessary to take corrective action for every variance, but it should be considered if the variance exceeds a certain threshold, such as five percent or $3,000. Therefore, the correct answer is that corrective action may be necessary.

Explanation

When actual costs vary from standard costs, corrective action may be necessary. This is because any deviation from the standard costs could indicate a problem or inefficiency in the production process. However, the necessity of corrective action may vary depending on the magnitude of the variance. It is not always necessary to take corrective action for every variance, but it should be considered if the variance exceeds a certain threshold, such as five percent or $3,000. Therefore, the correct answer is that corrective action may be necessary.

9. For the previous month, actual food costs exceeded standard food costs at Buddy's Bar & Grill. Which of the following could have possibly caused the variance?

A significant change in the sales mix, with guests ordering menu items having high contribution margins

Smaller portion sizes prepared by food production staff

Food production staff using higher quality ingredients than called for by standard recipes

Price cuts by suppliers during the month that weren’t reflected in the selling prices of affected menu items

The variance in actual food costs exceeding standard food costs could have been caused by the food production staff using higher quality ingredients than called for by standard recipes. This would result in higher costs for the ingredients, leading to a higher overall food cost.

Explanation

The variance in actual food costs exceeding standard food costs could have been caused by the food production staff using higher quality ingredients than called for by standard recipes. This would result in higher costs for the ingredients, leading to a higher overall food cost.

10. Year after year, the As-You-Like -It Bistro handles a large volume of business at lunch. The manager attributes the operation's success to radical menu changes every three months. Many of the new menu items result from suggestions made by guests. Which of the following sources of information offers the manager the most reliable basis for developing cost standards?

Industry averages

Past financial statements

Operating budgets

In-house standard costs

The manager can develop cost standards based on in-house standard costs because these costs are specific to the bistro's operations and reflect the actual expenses incurred. This information is reliable as it takes into account the unique characteristics and requirements of the business, allowing the manager to accurately estimate costs and make informed decisions. Industry averages, past financial statements, and operating budgets may provide some insights, but they may not accurately reflect the specific needs and circumstances of the bistro.

Explanation

The manager can develop cost standards based on in-house standard costs because these costs are specific to the bistro's operations and reflect the actual expenses incurred. This information is reliable as it takes into account the unique characteristics and requirements of the business, allowing the manager to accurately estimate costs and make informed decisions. Industry averages, past financial statements, and operating budgets may provide some insights, but they may not accurately reflect the specific needs and circumstances of the bistro.