Accounting Final Multiple Choice

A

When demand is elastic, a price increase will __________ total revenues. a. decrease b. increase c. decrease, then increase d. have no effect on

C

When the desired food cost percentage is 32%, the multiple used for determining prices using the ingredient mark-up approach is: a. 4.000. b. 3.330. c. 3.125. d. 3.000.

B

Which cost increases the most on a per-unit basis as volume decreases? a. Variable b. Fixed c. Mixed d. Total

B

Which of following does NOT explain what breakeven point is? a. The level of sales volume at which total revenues equal total costs b. The level of sales volume at which total variable costs exceed total fixed costs. c. The level of sales volume at which profit equals zero d. The level of sales volume at which there is no difference between total revenues and total costs.

C

Which of the following is a qualitative forecasting method? a. econometrics b. the moving average method c. market research d. the exponential smoothing method

C

Which of the following is an informal approach to pricing? a) ingredient mark-up approach b) $1 per $1,000 approach c) competition-based pricing d) bottom-up approach

D

Which of the following is not a fixed cost? a) property taxes b) salary (set at $25,000 for the period) c) depreciation d) operating supplies

D

Which of the following is not a relevant factor in the selection of a forecasting method for a hospitality operation? a. the frequency with which forecasts will be updated b. the turnaround time required for an updated forecast c. the purposes for which forecasts are made d. the forecasting methods used by competitors

A

Which of the following is not an effective inventory control procedure: a. Storage employees should maintain inventory records. b. Adjustments to inventory records must be approved by the controller. c. Storage and production staff should be required to leave the facility by an exit that is easily observed by managers. d. Inventories and usage rates of high-priced items should be monitored daily.

B

Which of the following is not an effective payroll control procedure? a. Departmental supervisors should approve all hourly employees' time reports. b. The accounting employee responsible for payroll should reconcile the payroll bank account. c. Employees independent of the payroll department should distribute paychecks to employees. d. Undelivered paychecks should be returned to the controller.

D

Which of the following is usually the controller's responsibility in preparing the operations budget? a. presenting the budget to the Ownership or Management Company b. providing financial information to operating managers c. formulating the comprehensive operating budget from departmental operating plans d. all of the above

D

Which of the following managerial tools projects the number of rooms to be sold at an expected average room rate for a given period? a. cash budget b. labor budget c. capital budget d. none of the above

B

Which of the following statements about forecasting in hospitality operations is true? a. Forecasting sales is the responsibility of department managers, while forecasting expenses is the responsibility of the accounting department. b. The further out the forecast period is from the date the forecast is prepared, the greater the likelihood of not achieving the forecast. c. Forecasting eliminates the uncertainty of future sales and expenses. d. Because historical activity is often an unreliable indicator of future activity, managers should avoid using historical data as a basis for forecasting.

D

On the twentieth day of the month, room sales at the Motor Lodge Motel exceeded its breakeven point for the month. Revenue generated by room sales during the remaining days of the month will: a) decrease in proportion to the additional room sales. b) cover the fixed costs associated with those additional room sales. c) be pure profit for the motel. d) increase at a faster rate than the costs associated with those sales

B

19. Which of the following best describes the process of capital budgeting? a. Forecasting revenues and expenses b. Determining the amount to spend on fixed assets and which fixed assets to purchase c. Determining a company's short-term and long-term investments in securities d. Limiting funds for capital improvements without considering the profitability of proposed projects

D

20. Which of the following decisions is directly related to the capital budgeting process? a. Projecting current charges b. Forecasting revenue from operations c. Forecasting cash flows from financing activities d. Acquiring fixed assets to increase sales

B

21. In considering an equipment purchase, a decision maker should focus on: a. Total cash flow. b. Incremental cash flow. c. Total operating results. d. Incremental operating results.

A

25. Which of the following factors is not considered by the payback model of capital budgeting? a. The time value of money b. Equal annual cash flows c. Unequal annual cash flows d. Project cost

B

A capital budgeting model that does not consider cash flows is the ________ model. a. Payback b. Accounting Rate of Return (ARR) c. Net present value d. Internal rate of return

B

A project with a projected 6-year life would cost $100,000. Its annual cash flows would be $40,000, while its annual income flows would be $30,000. The payback period would be __________ years. a. 2 b. 2.5 c. 3.33 d. 6

D

Corporate executives at a nationwide restaurant chain wanted to refine their regional sales forecasts for the upcoming year. They invited key unit managers from the various regions to a three-day planning session focusing on economic conditions, menu changes, and other factors that could affect future sales. Which of the following forecasting methods did the corporate management team use? a. the exponential smoothing method b. econometrics c. market research d. jury of executive opinion

C

During a recent 30-day period, the El Sol Resort sold 4,000 rooms at an average room rate of $80. During the next 30-day period, the price was increased to $90, and 3,500 rooms were sold. What is the price elasticity of demand for the resort's rooms? a) .10 b) .13 c) 1.00 d) 1.29

B

Hotels should try to sell their room inventory with the ____________ to the customers who are _______ price sensitive, a) Highest rate possible; very b) Highest rate possible; not c) Lowest rate possible; very d) Lowest rate possible; not

C

If a proposed capital project has an internal rate of return of 13% with a hurdle rate of 11%, what course of action is recommended? a. The hurdle rate should be recalculated using a different set of assumptions. b. The payback model should be used to further analyze the financial feasibility of the project. c. The project should be accepted. d. The project should not be accepted.

C

If the average room rate is $50 when 500 rooms are sold, and if the multiple occupancy is 40% and double rooms are priced $10 higher than single rooms, then the price of a double room is: a) $50 b) $54 c) $56

B

In January, the total fixed costs at the 250-room Vacation Hotel were $40,000. With 5,000 rooms sold in January, the average fixed cost per room sold was $8. The forecast for February projects a 10% increase in occupancy over January. If this increase in sales volume occurs, the total variable costs for February would be: a. Lower than in January. b. Higher than in January. c. Relatively the same as in January. d. Unrelated to January's total variable cost

A

Inelastic demand: demand is not very sensitive to price changes—that is, a price increase will lead to a relatively small drop in quantity demanded; in other words, the price increase will generate more revenue than the drop in demand loses a) True b) False

C

Informal approaches to pricing hospitality products and services fail to take into account: a. pricing by competitors. b. what the market will bear. c. costs. d. intuitions of experienced managers.

B

Jerome, the catering manager at the City Center Hotel, uses a time series approach to forecasting sales and scheduling staff. In order to take seasonality of business into account, Jerome should: a. adopt a different forecasting method because the time series approach cannot take seasonality of business into account. b. use data from the same period in the previous year as a base figure. c. use forecasted figure from a previous period and adjust it according to actual activity in that period. d. none of the above

D

Ricardo's Restaurant has the opportunity to invest $5,000 at an annual interest rate of 10%. What would be the value of the $5,000 at the end of two years? a. $4,132 b. $5,500 c. $6,000 d. $6,050

B

Ruben, the new general manager at the Roadside Inn, reviewed a computer-generated graph of occupancy data for each month over the past five years. Which of the following types of patterns would Ruben find if the graph showed fluctuations in business that were consistent from year to year according to the time of year? a. cyclical pattern b. seasonal pattern c. trend pattern d. scatter pattern

B

The ABC Hotel has 100 guest rooms and ran an 80% occupancy in 2014. If the average daily rate for 2014 was $200, and 40% of the total room revenue is VC, what is the Unit Variable Cost (UVC) for 2014? a. $60 b. $80 c. $90 d. $85

D

The Economy Inn maintains an average selling price per room of $40 and incurs a variable cost per room sold of $10. If the property's fixed costs are $24,000 for the month, the breakeven point for the month would be: a) 240 rooms sold. b) 480 rooms sold. c) 600 rooms sold. d) 800 rooms sold

A

The High Towers Center is a 300-room hotel that was built ten years ago for a total project cost of $24,000,000. The market value of the facility is now estimated at $42,000,000. According to the $1 per $1,000 approach to pricing rooms, what should be the price of a room night? a) $80 b) $240 c) $420 d) $24,000

C

The University Golf Shop desires to make $10,000 in pretax profits. If the contribution margin ratio (CMR) is 50% and the fixed costs are $110,000, what is the required level of sales to achieve the $10,000 profit? a) $200,000 b) $220,000 c) $240,000 d) $260,000

C

The current cost of food sold at the 'Big Fish' Restaurant is 35% of sales. If sales increase, the restaurant manager should generally expect an increase in: a) Total fixed costs. b) The average fixed cost per meal sold. c) The total cost of food sold. d) The average variable cost per meal sold.

B

What is "Margin of Safety"? a. The level of sales volume at which total costs equal total revenues b. The excess of actual sales over sales at the breakeven level c. The impact on profits of charges in sales volume d. An operation that substitutes fixed costs for variable costs

A

The hurdle rate is the minimum Internal Rate of Return that must be met or exceeded for a project to be accepted. a. True b. False

B

The operations budget reflects: a. cash receipts and disbursements. b. revenues and expenses. c. capital expenditures. d. balance sheet items.