HMGT 4210 EXAM REVIEW

three of the most popular systems of menu analysis are:

1) food cost % 2) contribution margin 3) goal value analysis

to establish any type of budget , you need to have the following information:

1) prior period operating results 2) assumptions 3) goals 4) monitoring policies

In general, the budget should be monitored in each of the following three areas:

1) revenue 2) expense 3) profit

The USAR can be understood by evaluating its four major sections:

1) sales 2) prime costs 3) other controllable costs 4) non-controllable expenses (arranged from most controllable to least controllable by the foodservice manager)

CVP calculations can be done on either:

1) the dollar sales volume needed to break-even 2) the # of guests (covers) needed to break-even

the long-range budget is typically prepared for a period of _________

3-5 years

What is the break-even point?

A break-even point (BEP) is the quantity at which total revenue and total cost are equal.

what is the goal value formula

A x B x C x D = goal value where: A = 1.00 - food cost % B = item popularity C = selling price D = 1.00 - (variable cost % + food cost %)

What is the Sarbanes-Oxley Act?

An act passed into law by Congress in 2002 to establish strict accounting and reporting rules in order to make senior managers more accountable and to improve and maintain investor confidence.

T or F: For best results, small restaurants should use USAR in the same way it is used in large restaurants.

False

T or F: leasing a piece of equipment for use in its kitchen would increase an operation's other controllable expenses.

False

T or F: restaurants must report their operating data in the USAR format.

False

T or F: there is one uniform system of accounts for use by all segments of the hospitality industry.

False

T or F: when using the USAR format, an operation's utility costs are classified as a non-controllable other expense.

False

T or F: an analysis of other expenses should be performed each time an operation's income statement is produced.

True

T or F: managers operating chain restaurant units can get comparison data on other expense costs in similar units from their district and regional chain managers.

True

T or F: the National Restaurant Association was involved in the development of the USAR.

True

T or F: the purpose of a uniform system of accounts is to encourage consistency in the reporting of financial information.

True

T or F: when using the USAR format, an operation's occupancy costs are classified as a non-controllable expense.

True

explain what USAR is

Uniform System of Accounts for Restaurants. The USAR seeks to provide a consistent and clear manner in which foodservice managers can record sales, expenses

what is the yardstick method

a measure of an operation's revenue as it relates to the size of the operation. Calculated as: total sales/total square footage.

what is a loss leader

a menu item that is priced very low, sometimes even below total costs, for the purpose of drawing large numbers of guests to the operation.

explain goal value analysis

a menu pricing and analysis system that compares goals of the foodservice operation to performance of individual menu items.

explain what matrix analysis is

a method for comparisons between menu items. A matrix allows menu items to be placed into categories based on whether they are above or below overall menu item averages such as food cost %, popularity, and contribution margin.

A manager is preparing her P&L using the USAR. Which item will she list first on the P&L? a) profits b) revenue c) food cost d) labor cost

a profits

describe cost of living adjustment (COLA)

a term used to describe a raise in employee pay

what is restaurant operating income

a term utilized in the USAR indicating an operation's remaining revenue after subtracting all operating expenses except costs those designated as corporate overhead, interest expense, and other income (expense).

which term refers to the recording and summarizing of financial data? a) bookkeeping b) tax accounting c) cost accounting d) financial accounting

a) bookkeeping

An operation's prime costs include its total cost of sales and its total a) labor costs b) occupancy costs c) non-controllable expenses d) other controllable expenses

a) labor costs

The profit margin achieved in an operation is equal to the operation's a) net income/total sales b) total sales/net income c) gross profit/total sales d) prime cost/net income

a) net income/total sales

net income is the profit generated by a business after all its appropriate expenses have been a) paid b) incurred c) recorded d) analyzed

a) paid

what formula is used to find before-tax profit

after-tax profit/1 - tax rate = before-tax profit

What is prime cost?

an operation's total cost of sales added to its total labor cost. Prime cost is clearly listed on the P&L because it is an excellent indicator of management's ability to control costs of sales and labor.

A manager;s operation generated net income last year of $350,500. This year, the operation experienced a 4% increase in net income. What was the operation's net income this year? a) $344,520 b) $364,520 c) $384,520 d)$404,520

b) $364,520

last year, a food cart owner's sales were $480,000. This year, the cart owner's sales were $450,000. What was the owner's sales variance percentage this year compared to last year? a) -62.5% b) -6.25 c) 6.25% d) 62.5%

b) -6.25%

last year, a manager's sales were $780,000. This year, the manager's sales were $873,600. What was the manager's sales variance percentage this year compared to last year? a) 11% b) 12% c) 13% d)14%

b) 12%

what is the typical ROS percentage for a profitable foodservice operations? a) less than 2% b) 2% to 20% c) 21% to 50% d) more than 50%

b) 2% to 20%

Last year, a manager achieved sales of $1,000,000 and a total labor cost of 30%. This year, the manager raised prices by 5% and gave employee raises and benefit increases that together will equal 2% of last year's labor cost. If there are no changes in labor efficiency, what should be this manager's (rounded) labor cost% for next year? a) 28% b) 29% c) 30% d) 31%

b) 29%

A manager's sales increased 10% this year compared to last year. At the beginning of this year, the manager gave all employees a 5% raise. What should have happened to the manager's fixed labor cost percentage and variable labor cost percentage this year compared to last year? a) FC% increases and VC% increases b) FC% decreases and VC% decreases c) FC% increases and VC% is unchanged d) FC% decreases and VC% is unchanged

b) FC% decreases and VC% decreases

what is the formula for average inventory value

beginning inventory value + ending inventory value/ 2 = avg. inventory value

what is bookkeeping

bookkeeping is the process of simply recording and summarizing financial data, and is not the same thing as the actual analysis of the data.

what is the formula used to find budgeted profit

budgeted revenue - budgeted expenses = budgeted profit

How many major sections are contained in a P&L prepared according to USAR recommendations? a) 2 b) 3 c) 4 d) 5

c) 4

a manager's operation generate net income last year of $161,500. This year the manager's net income was $169,575. What was the percentage increase in net income achieved by the manager this year? a) 0.05% b) 2.5% c) 5.0% d)25%

c) 5%

A manager's operation has both fixed and variable labor costs. What will be the impact on labor's fixed cost percentage and variable cost percentage if the manager increases the operation's sales by serving more guests? a) FC% increases and VC% increases b) FC% decreases and VC% increases c) FC% increases and VC% is unchanged d) FC% decreases and VC% is unchanged

c) FC% increases and VC% is unchanged

what do the initials "CPA" refer to in a business environment? a) certified public analyst b) certified personal analyst c) certified public accountant d) certified personal accountant

c) certified public accountant

on a P&L prepared using the USAR format, which ratios are NOT calculated as a percentage of total sales? a) labor costs b) occupancy costs c) food and beverage costs d) non-controllable expenses

c) food and beverage costs

In the past decade , which labor expense category had the fastest-rising costs for foodservice operators? a) wages b) FICA taxes c) health insurance d) 401(k) contributions

c) health insurance

what is another name for an operation's P&L statement? a) balance sheet b) income summary c) income statement d) statement of cash flows

c) income statement

an operation's profit margin is identical to its a) net income b) prime costs c) return on sales d) total contribution margin

c) return on sales

where do managers list detailed information regarding expenses incurred in the operation of their business? a) balance sheet b) income statement c) supporting schedules d) statement of cash flows

c) supporting schedules

what is another term used to identify managerial accounting? a) bookkeeping b) tax accounting c) cost accounting d) financial accounting

cost accounting

what is the formula for inventory turnover

cost of food consumed/average inventory value = food inventory turnover

food cost % formula

cost of food sold/total food sales

last year, a steakhouse manager's sales were $1,525,000. This year, the manager increased menu prices by 5 percent and achieved sales of $1,745,500. What was the manager's actual sales percentage increase after adjusting for menu price increase? a) 3% b) 5% c) 7% d) 9%

d) 9%

which term refers to the analysis of a business's monthly financial operating results? a) bookkeeping b) tax accounting c) cost accounting d) managerial accounting

d) managerial accounting

The main sections in a P&L prepared according to USAR recommendations are listed from a) least variable to most variable b) most variable to least variable c) least controllable to most controllable d) most controllable to least controllable

d) most controllable to least controllable

foodservice operators can measure their sales in terms of either dollars or a) net income b) gross revenue c) check averages d) number of customers served

d) number of customers served

when total dollar sales volume increases, fixed labor cost percentages will _________

decline

what is cost accounting (managerial accounting)

documenting and analyzing sales, expenses, and profits

what are some advantages of using goal value analysis

ease of use, accuracy, and the ability to simultaneously consider more variables than is possible with two dimensional matrix analysis

what is the formula used to find the sales dollars to achieve desired after-tax profit

fixed cost + before-tax profit/contribution margin % = sales dollars to achieve desired after-tax profit

what formula is used to find guests to be served to achieve desired after-tax profit

fixed costs + before-tax profit/ contribution margin per guest = guests to be served to achieve desired after-tax profit

what is the formula used to find the break-even point in sales

fixed costs/contribution margin % = break-even point in sales

what is the formula used to find the break-even point in guests served

fixed costs/contribution margin per unit (per guest) = break-even point in guests served

what is a frequent criticism of the contribution margin approach to menu analysis

it tends to favor high-priced menu items over low-priced ones, because higher priced menu items, in general, tend to have the highest contribution margins.

what is supporting schedules

list of all details associated with each line item on the income statement.

define non-controllable expenses

lists those costs that are least controllable by a foodservice manager. (ie: interest paid to creditors as part of a short term or long term debt repayment is due regardless of the ability of the manager to control day-to-day operating expenses)

explain cost/value/profit (CVP) analysis

method that helps predict the sales dollars and volume required to achieve desired profit (or break-even) based on known costs.

what is the formula for MSP

minimum labor cost/1 - minimum operating cost = MSP

what is the formula for MSP

minimum labor cost/1 - minimum operating cost = MSP or: minimum labor cost/1 -(food cost % + variable cost %) = MSP

A purpose of the P&L statement is to identify _____ _________ which is the profit generated after all appropriate expenses of a business have been paid

net income

formula for percentage variance

net income this period - net income last period/ net income last period = percentage variance

what is the formula for profit margin (return on sales)

net income/total sales = profit margin

what does goal value analysis evaluate that the matrix analysis does not

nonfood variable costs and item selling price

what defines 'other controllable costs'

other controllable costs are those nonfood, nonbeverage, and nonlabor costs controlled by the manager, but more so on a weekly or monthly basis (with the exception of employee wages, which you can most often control daily)

What is inventory turnover?

refers to the number of times the total value of inventory has been purchased and replaced in an accounting period

what is the Patient Protection and Affordable Care Act

the federal law mandating, in some situations, that foodservice employers provide health care insurance for their employees.

what is the income (P&L) statement

the income statement is the financial report that details the sales achieved, the money spent on expenses, and the resulting profit generated by a business during a specific time period. Also referred to as the profit and loss statement.

what is minimum sales point (MSP)

the sales volume required to justify staying open for a given period of time.

The income statement is an aggregate statement, what does this mean?

this means that all details associated with the sales, cost, and profits of the foodservice establishment are summarized on the P&L statement. Although this summary gives the manager a look at overall performance of the operation, details of income and expense are not included directly on the statement.

formula for this year's projected labor cost

this year's sales x last year's adjusted labor cost % = this year's projected labor cost

formula for average contribution margin per item

total contribution margin/number of items sold = average contribution margin

gross profit formula

total sales - total cost of sales = gross profit

what is the formula for sales per seat

total sales/available seats = sales per seat

what is the formula for sales per square feet

total sales/total square footage occupied = sales per square feet