Chapter:Dave Operations Budgeting And Cost-variance-profit Analysis

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  • 1/9 Questions

    Which of the following methods for projecting revenues in the budgeting process assumes that past trends are good predictors of future growth?

    • Revenue history
    • Inflation adjustment
    • Competitive analysis
    • Expense history
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About This Quiz

This quiz focuses on operations budgeting and cost-variance-profit analysis in multi-unit food service companies. It assesses knowledge on budgeting processes like bottom-up budgeting, revenue projection methods, and understanding of fixed and variable costs, crucial for effective financial management.

Operations Management Quizzes & Trivia

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  • 2. 

    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:

    • $25,000 net income

    • $10,000 net income

    • $0 (breakeven)

    • $10,000 net loss

    Correct Answer
    A. $10,000 net income
    Explanation
    The net income for the month can be calculated by subtracting the total variable costs and fixed costs from the total revenue. The total revenue can be found by multiplying the average price per meal sold ($15) by the number of meals sold (5,000), which equals $75,000. The total variable costs can be found by multiplying the average variable cost per meal ($7) by the number of meals sold (5,000), which equals $35,000. The fixed costs are given as $30,000. Therefore, the net income can be calculated as $75,000 - $35,000 - $30,000 = $10,000.

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  • 3. 

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

    • Reforecasting

    • Bottom-up budgeting

    • Top-down budgeting

    • Mark-up budgeting

    Correct Answer
    A. Bottom-up budgeting
    Explanation
    Bottom-up budgeting is a budgeting process that ensures plans are specifically geared to individual operations within multi-unit food service companies. In this approach, each unit or department within the organization is responsible for creating its own budget based on its specific needs and goals. These individual budgets are then aggregated to create an overall budget for the entire company. This approach allows for greater accuracy and accountability at the operational level, as each unit has a clear understanding of its own requirements and can tailor its budget accordingly.

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  • 4. 

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

    • General manager’s salary

    • Rent expense

    • Property taxes

    • Food costs

    Correct Answer
    A. Food costs
    Explanation
    Food costs are the most likely to be classified as a variable cost because they directly vary with the level of production or sales. As the business produces more or sells more, the cost of food will increase. Conversely, if production or sales decrease, the cost of food will also decrease. This is in contrast to the other options: the general manager's salary, rent expense, and property taxes, which are typically fixed costs that do not vary with production or sales levels.

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  • 5. 

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

    • Variable

    • Mixed

    • Allocated

    • Fixed

    Correct Answer
    A. Fixed
    Explanation
    Fixed costs are costs that do not change regardless of the sales volume. These costs remain constant in the short term and do not fluctuate with changes in production or sales. They are often associated with expenses such as rent, salaries, insurance, and utilities, which do not directly depend on the level of output. Fixed costs are important for businesses to consider when analyzing their cost structure and determining the breakeven point.

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  • 6. 

    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:

    • $12,000

    • $48,000

    • $72,000

    • $80,000

    Correct Answer
    A. $12,000
    Explanation
    The percentage method for estimating expenses involves calculating the estimated cost based on a percentage of the projected revenue. In this case, the current beverage cost is 20 percent of the projected beverage revenue of $60,000. To find the estimated beverage cost for the new budget period, we multiply the projected revenue by the percentage: 20% of $60,000 is $12,000. Therefore, the estimated beverage cost in dollars for the new budget period would be $12,000.

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  • 7. 

    At the 120-seat 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:

    • Lower than in September

    • Higher than in September

    • Relatively the same as in September

    • Impossible to forecast with any accuracy

    Correct Answer
    A. Relatively the same as in September
    Explanation
    The correct answer is "relatively the same as in September" because fixed costs do not change with the level of production or sales. Since the increase in sales volume is only 10%, it is unlikely to have a significant impact on fixed costs. Therefore, the manager should expect the total fixed costs for October to be relatively the same as in September.

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  • 8. 

    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

    • $6

    • $8

    • $10

    • $12

    Correct Answer
    A. $12
    Explanation
    To find the average selling price per meal sold, we need to calculate the total cost per meal and add the desired profit. The total cost per meal is the sum of the average variable cost per meal ($6) and the fixed cost per meal (total fixed costs divided by the number of meals, which is $24,000 divided by 6,000). This gives us a total cost per meal of $10. Adding the desired profit of $12,000 to the total cost per meal, we get a selling price per meal of $12.

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  • 9. 

    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:

    • $4

    • $6

    • $8

    • $10

    Correct Answer
    A. $10
    Explanation
    The breakeven point is the point at which total revenue equals total costs, resulting in zero profit. In this case, the fixed costs are $24,000 and the variable cost per meal is $6. To find the breakeven selling price per meal, we need to divide the total costs by the expected number of meals. The total costs can be calculated by multiplying the variable cost per meal by the number of meals and adding the fixed costs. So, the total costs would be (6000 * $6) + $24,000 = $36,000. Dividing this by the number of meals (6000) gives us a breakeven selling price per meal of $6. Therefore, the correct answer is $6.

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  • Current Version
  • Mar 21, 2023
    Quiz Edited by
    ProProfs Editorial Team
  • Dec 09, 2012
    Quiz Created by
    Hmgt
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