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business
management accounting

Questions and Answers of Management Accounting

11. Give a brief explanation of how to prepare a graph when using the multipoint graph method for separating the fixed and variable elements of a cost.
10. Explain why the high–low method may not be a good method to use to separate the fixed and variable portions of a cost.
9. With figures of your own choosing, illustrate how the high–low calculation method can be used to separate the fixed and variable elements of a cost.
8. Define the term high operating leverage and explain why, in times of increasing sales revenue, it is more profitable to have high rather than low operating leverage.
7. Explain why you think it sometimes makes sense to sell below cost.
6. What do you think might be the relevant costs to consider in deciding which one of a number of different vacuum cleaner models to buy for housekeeping purposes?
5. Why might it not be wise to allocate an indirect cost to various departments on the basis of each department’s sales revenue to total sales revenue?
4. Why are some costs known as semifixed or semivariable?
3. Differentiate between a fixed cost and a variable cost and give an example of each that is not in the text.
2. Define discretionary cost and give two examples (other than those given in the text) of such a cost.
1. Differentiate between a direct cost and an indirect cost.
6 Explain and use each of the following three methods to separate semifixed or semivariable costs into their fixed and variable elements: high–low calculation, multipoint graph, and regression
5 Define the term high operating leverage and explain its advantages and disadvantages.
4 Use knowledge about fixed and variable costs for a variety of different business decisions, such as whether to close during the off-season.
3 Use relevant costs to help determine which piece of equipment to buy.
2 Prorate indirect costs to revenue departments and make decisions based on the results.
1 Briefly define and give examples of some of the major types of costs, such as direct and indirect costs, fixed and variable costs, and discretionary costs.
P6.12 The Inviting Inn has 500 available guest rooms. For a certain week next month, the anticipated transient demand for rooms is as follows:The Inn has the possibility of booking another group of
P6.11 Motley Motel’s potential average room rate is calculated to be $62. Assume that this motel had three market segments. Vacation travelers use 75 percent of the room nights and are charged 100
P6.10 The Resolute Resort hotel currently operates at a 75 percent occupancy, using a rack rate for all rooms of $60 and a marginal cost per room sold of $8. Calculate the occupancy figures for
P6.9 A 45-room resort hotel has three sizes of rooms, as follows:15 singles at 150 square feet each 15 doubles at 220 square feet each 15 suites at 380 square feet each
P6.8 A motel has 30 rooms and expects a 70 percent occupancy next year. The owners’ investment is presently $520,000, and they expect a 12 percent after-tax annual return on their investment. The
P6.7 You have been given the following information on the next page about a hotel for the next year. The hotel has 40 rooms and expected occupancy rate of 70 percent. Rooms department, operating
P6.6 An owner invested $180,000 in a new family-style restaurant, of which$160,000 was immediately used to purchase equipment and $20,000 was retained for working cash. Estimates for the first year
P6.5 You have the following information about Beech Tree Café’s lunch menu with 10 entrées:Number Menu Item Menu Item Menu Item Sold (MM) Food Cost Selling Price Complete a menu engineering
P6.4 A 140-seat dining room had a weekly customer count by meal period and day:
P6.3 A restaurant has 90 seats. Total annual sales revenue for next year is projected to be $975,000. The restaurant is open 52 weeks a year and serves breakfast and lunch 6 days a week. Dinner is
P6.2 A 25-room budget motel expects its occupancy next year to be 80 percent. The owners’ investment is $401,600. They want an after-tax return on their investment of 10 percent. Tax rate is 28
P6.1 You have the following projections about the costs in a family restaurant for next year:Net income required: 15% after income tax on the owner’s present investment of $80,000, income tax rate
E6.10 Using the following information, determine the average single- and double-room rates:Average rooms sold per day: 40 Average rooms double occupied: 15 Spread wanted between single- and
E6.9 Assume a rooms operation had 40 each, 240-square-foot rooms, and 20 each, 180-square-foot rooms. The average occupancy for both types of rooms is 74 percent. An average of $2,220 of sales
E6.8 A small motel operation with 40 rooms has an average occupancy rate of 70 percent. The forecasted sales revenue for the coming year is$776,720. What is the average room rate expected to be?
E6.7 A rooms operation reported a total of 8,760 rooms sold, with a total of 10,512 guests in the previous year. What was the double-occupancy rate?
E6.6 A restaurant with 108 seats, serving both lunch and dinner 6 days per week, reported total annual sales revenue of $988,000. Dinner generates 65 percent of total sales revenue, with a seat
E6.5 Using information from E6.4, determine the effect on the average check if seat turnover decreases from 2.5 to 2 times per day.
E6.4 Average revenue of a restaurant with 88 seats for a month with 26 operating days and a seat turnover of 2.5 is $46,800. Determine the average check for the month.
E6.3 If the total fixed and other identified operating costs are estimated to be$145,000 and all variable costs total 84 percent of total sales revenue, what is estimated total sales revenue?
E6.2 Using information given in E6.1, identify the amount of income tax to be paid.
E6.1 Determine the operating income necessary to yield a net after-tax income of $28,000 using a current tax rate of 20 percent.
20. Discuss the concept of product and/or service differentiation in a restaurant situation.
19. What implications does the breakdown of a business’s costs into fixed and variable ones have on the pricing decision?
18. State the equation for calculating elasticity of demand.
17. Define elasticity of demand and, using figures of your own choosing, show how a reduction in a hotel’s average room rate and the resulting change in total sales revenue would indicate an
16. Define the terms rack rate and potential average room rate.
15. Of what value might it be to calculate hotel room occupancy by day of the week, or seat turnover in a restaurant by day of the week, rather than using an average weekly figure?
14. Describe how a double-occupancy percentage for rooms is calculated.
13. If a hotel has an average room rate of $75, explain why every customer staying in the hotel will not pay this average rate.
12. Explain briefly how a motel’s average room rate can be calculated or projected by using the bottom-up approach.
11. Why is loss of sales revenue from hotel rooms not occupied on a given day more of a problem than loss of sales revenue from customers who did not show up in a restaurant on a given day?
10. In menu engineering, state what dogs are.
9. In menu engineering, what are the two main factors about each menu item that are considered?
8. Explain why you do or do not think that the food cost percentage figure is important in menu pricing.
7. What factors would a restaurant manager need to consider when establishing individual menu item prices?
6. Define the term sales mix and explain what influence sales mix can have on an average check.
5. If an average check was established to support a specific level of total sales revenue in a restaurant and the seat turnover rate becomes too low to support the desired total revenue, explain how
4. Explain how forecasted (budgeted) revenue for a hospitality operation can be used to determine an average check and an average room?
3. Explain why net income (after tax) can be treated as another cost of running a business operation.
2. Differentiate long-run from tactical pricing and list four events that might necessitate tactical pricing.
1. Discuss the advantages and disadvantages of the three traditional pricing methods used by the hospitality industry.
10 Discuss some of the important considerations in pricing, such as the objectives of an organization, elasticity of demand, cost structure, and competition
9 Discuss room rate discounting and calculate occupancy percentage for a discount grid. Calculate a potential average room rate and discounted rates for various market segments.
8 Calculate room rates based on the square footage of a room.
7 Calculate an average room rate to cover all forecasted costs, including net income after tax, and convert the average rate to an average single and average double rate.
6 Complete a menu engineering worksheet and discuss how to adjust the menu to respond to the results.
5 Discuss the considerations to be kept in mind when pricing a menu item and calculate seat turnover figures. Also discuss integrated pricing for a restaurant.
4 Use existing information to calculate an average check per meal period and explain the effect that sales mix of the various menu items will have on the average check.
3 Calculate total annual revenue required for a restaurant operation to cover all forecasted costs including net income after tax and convert the annual revenue to an average check amount.
2 Explain the concept of using net income after tax as a cost.
1 Discuss the advantages and disadvantages of various traditional pricing methods used in the hospitality industry and understand the difference between long-range and tactical pricing.
P5.12 A fast-food restaurant uses a standard cost approach to aid in controlling its food cost. The following are the standard cost, sales prices, and quantities sold of each of the five items
P5.11 The sales records for a coffee shop that has only six items on its menu show the following quantities sold during the month of January. Item standard cost and selling prices are also
P5.10 A fast-food restaurant features only three entree items on its menu with the following cost and selling prices:Item Cost Selling Price 1 $2.00 $6.60 2 4.40 8.80 3 3.90 9.75a. For each item
P5.9 At some of the banquets held in a hotel, the bar is operated on a cash basis. All drinks are the same price. Banquet customers buy drink tickets from a cashier at the door. The customers then
P5.8 A small hotel has an outside accountant prepare an income statement after the end of each month. For the last three months the amount shown as bad debts had increased considerably over any
P5.7 A restaurant has been in operation for the past five years and has successfully increased its revenue each year. One of the reasons is that in the third year the owner began extending credit to
P5.6 The owner of Charlene’s Restaurant believes that her food cost is higher than it should be. Charlene thinks that the problem might be in the receiving area and/or the dining area because she
P5.5 The bookkeeper who has worked for a small hotel for more than 30 years is retiring. Because he was such a reliable employee, he was given more and more responsibility over the years and did
P5.4 A restaurant carries out a monthly bank reconciliation. The August 31 reconciliation showed the following: The restaurant bank balance is$4,112 and the bank statement balance is $2,760. Deposits
P5.3 A hotel company carries out a monthly bank reconciliation. At the beginning of November, it found the following concerning the October reconciliation: The bank balance on the bank statement was
P5.1 A motel has established a petty cash fund of $100 that is controlled by the day shift desk clerk. During October, the following disbursements supported by receipts or memoranda were made from
E5.8 Explain the difference between a purchase order and a purchase requisition.(p-97)
E5.7 Assume the same person handles all cash and checks received in payment of an account. Explain how lapping works. Using the following information showing the day in July each payment was
E5.6 Identify to what standard food cost percentage is compared.
E5.5 Explain the purpose of standard cost control.
E5.4 Explain the purpose of a bank reconciliation.
E5.3 A petty cash fund with a $150 limit had receipts of $112 and cash (coin and currency) of $36. Explain the status of the fund.
E5.2 Define the purpose of a petty cash fund.
E5.1 Define the major objective of internal control.
15. List the steps to reconcile the bank statement balance to the check register balance.
14. The balance of a company’s check register normally will not agree with the bank statement balance prior to reconciliation. Why?
13. Explain the reasons why payment of cash wages should be avoided.
12. List the special procedures that are necessary for control of payroll and distribution of paychecks.
11. In paying invoices by check, how can control be established?
10. Describe how a petty cash fund is established.
9. Why should all cash receipts be deposited intact each day in the bank?
8. List and briefly discuss appropriate procedures for control over product storage and explain how perpetual inventory cards can be used in inventory control.
7. List the five documents or forms used for control of purchases. Briefly explain the use of any two of these documents.
6. What does the term division of responsibilities mean?
5. Explain how lapping works.
4. Explain what separation of record keeping from control of assets means.

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