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management accounting

Questions and Answers of Management Accounting

On December 31, 2004, a small motel has a bank balance of $7,100.On that same date its balance sheet showed that it had a bank loan payable of $73,900. The motel’s budgeted income statement is as
You have the following information about a restaurant:Collections on credit revenue average 90 percent in the month following the sales and the remaining 10 percent in the month following. Cost of
You own a new restaurant that is due to open on June 1.The restaurant expects to take in $1,500 a day in sales revenue and is open seven days a week. Sales revenue is estimated to be 80 percent cash
For each of the following alternatives, calculate the minimum account receivable payment (to the closest dollar) that would make a lockbox system profitable: Bank Charge per Item Opportunity Cost
A small motel with a small dining room has prepared the following estimates for the year 2005:In July of 2005, the owner plans to buy $30,000 of new equipment (for cash), less a $5,400 trade-in of
From the information following for Cato’s Catering, prepare a cash budget for six months commencing April 1: Sales Purchases Other Food February $30,000 $9,000 Beverage Food Beverage Wages Expenses
A new restaurant was incorporated on January 1, 2005. Forty thousand shares were issued for $6.00 cash per share. The cash received from the sale of shares was used, in part, as follows:The remaining
Stew and Brew have decided to lease a new restaurant. Rent for the building will be $3,000 a month to be paid on the first day of each month. They initially invested $225,000 of their own money,
Fritz, the owner of the Ritz Cafe, needs an after-tax cash flow of $27,000 next year. Principal payments on loans are $42,000 a year, and depreciation is $21,000. Tax rate for the Ritz Cafe is 25
Cece Saw, a carpenter who has saved some money, has decided to build and operate, with his wife, a ten-unit highway budget motel. Cece invests$50,000 of his own money in the company ($10,000 by way
Discuss the ways in which long-term asset management differs from dayto-day budgeting.
How is the accounting rate of return calculated? What is the major disadvantage of using this method?
What is the equation for calculating the payback period? What are the pros and cons of this method?
Under what conditions might a hotel consider buying an item of equipment with a rapid payback rather than one with a high accounting rate of return?
Discuss the concept that money is worth more now than that same amount of money a year from now.
How would you explain discounted cash flow to someone who had not heard the term before?
In Exhibit 12.4, in the 11 percent column opposite year 5, is the number 0.5935. Explain in your own words what this number or factor means.
If an investment requires an outlay today of $10,000 cash and, over the fiveyear life of the investment, total cash returns were $12,000, and the $12,000 had a present value of $9,500, would you make
Contrast the NPV and the IRR methods of evaluating investment proposals.
Under what circumstances might NPV and IRR give conflicting decisions in the ranking of proposed investments?
What factors, other than purely monetary factors, might one want to consider in a buy-versus-rent decision?
Assume you are given the following information regarding a pointof-sale computer terminal: The net annual saving was calculated to be$2,000 on an average investment cost of $4,500. What is the
Information is provided on two machines, which had an original cost of$25,800 for Machine X and $24,200 for Machine Y.a. Which is the best investment using the payback period method?b. Will either of
Investment in an item of equipment is $18,000. It has a five-year life and no salvage value and straight-line depreciation is used. The equipment is expected to provide an annual saving of $2,000,
What is the net present value of $2,125 for each year of two years with a discount factor of 0.8929 in year 1 and 0.7972 in year 2?
Assume an item of equipment is purchased at a cost of $22,500 to be paid for over five years, requiring a payment on principal of 20 percent per year at an annual interest rate of 10 percent.
You have the following information about three electronic sales registers that are in the market. The owner of a restaurant asks for your help in deciding which of the three machines to buy.Income
Using the information provided in Problem 12.1, which would be the best investment using the payback period method? If the owner wanted her cash back in less than four years, should she invest in any
An investor is planning to open a new fast-food restaurant. He has a five-year lease on a property that would require an investment estimated at $205,000 for redecorating and furnishing. He would use
Dinah, the operator of Dinah’s Diner, wishes to choose between two alternative investments providing the following annual net cash inflows over the five-year investment period:a. Calculate the
A hotel manager wishes to choose between two alternative investments giving the following annual net cash inflows over a five-year period:The amount of the investment under either alternative will be
A restaurant operator wishes to choose between two alternative roll-in storage units. Machine A will cost $9,000 and have a trade-in value at the end of its five-year life of $1,500. Machine B will
Pete’s Pizza is planning to purchase a new type of oven that cooks pizza much faster than the conventional oven now used. The new oven is estimated to cost $20,000 (use straight-line depreciation)
You have to make a decision either to buy or to rent the equipment for your restaurant. Purchase cost would be $30,000. Of this amount,$7,500 would be paid cash now, and the balance would be owed to
Pizza Restaurant provides a delivery service and is considering purchasing a new compact vehicle or leasing it. Purchase price would be$13,500 (cash), which the restaurant has. Estimated life is five
For many years, a motor hotel has been providing its room guests with room service of soft drinks and ice, using the services of a part-time bellhop to deliver to the rooms. Typically, the service
A motel leases out its 1,000-square-foot coffee shop, although it continues to own the equipment. The lease is due for renewal. The motel could continue to rent the space for $2 a square foot per
Since a feasibility study for a proposed new venture cannot guarantee that the venture will be successful, of what value is such a study?
In a feasibility study for a restaurant in a downtown office building, what general market characteristics do you think would be relevant?
Briefly describe how a composite growth rate of demand for hotel rooms can be calculated.
Two similar competitive restaurants have quite different levels of demand(average total number of customers per day). What factors could cause this to be so?
In preparing the pro forma income statement for a rooms department, how do you think the average room rate and occupancy figures could be established?
In estimating total sales revenue for a coffee shop in a proposed new hotel, why is it important to begin by estimating sales revenue by meal period?
What adjustments generally have to be made to the net income figures to convert them to a cash flow basis?
In what way might a change in the depreciation method used affect the projected cash flow figures in a feasibility study?
If the initial feasibility of a proposed new hotel does not appear good from a financial point of view, what variables might one try to change to improve the result?
There are five competitive motels in a resort area with the following number of rooms and current occupancy rates:Demand for rooms in the area is broken down into the following sources and growth
Six competitive motor hotels have the following number of rooms and current occupancy rates.Demand for rooms in the area where the motor hotels are located is broken down into the following sources
A financial feasibility study is being carried out for a proposed new 120-seat restaurant. It will be open for both lunch and dinner from Monday through Saturday and for dinner only on Sunday. For
A new 50-room budget motel is being planned. Total cost will be$1,450,000, of which land will be $150,000, building $900,000, furniture and equipment $300,000, and the balance for preopening interest
Given the facts in Problem 13.4, assume the building will be depreciated at 6 percent double declining balance, and that furniture and equipment will be depreciated at 25 percent double declining
Given the facts in Problems 13.4 and 13.5 and the following additional information, prepare the pro forma income statements for each of the first five years:Rooms operating costs average 60 percent
Given the facts in Problems 13.4, 13.5, and 13.6, calculate the net annual cash flow figures for each of the five years. What would be your evaluation of the financial feasibility of this proposed
Explain your understanding of a mission statement and state four purposes that it can serve.
Briefly describe your understanding of the meaning of financial management.
Explain how you think a small restaurant operation can practice good financial management.
What is your understanding of the term satisficing?
Explain why wealth maximization, as indicated by market price of shares, may not be achieved by profit maximization.
Would the objective of no net income for a certain period (e.g., three years)be consistent with the goal of wealth maximization? Explain.
What is a secondary goal? Give an example that might be appropriate for the housekeeping department of a hotel.
Define MBO and explain how it is used in an organization. What is goal congruence, and how does it fit in with MBO?
Discuss the need for an action plan to achieve goals and differentiate between strategies and tactics.
What are the four steps in the decision-making process?
Discuss how you think an information system should be judged for quality.
What are the main criteria for information so it is useful in the decisionmaking process?
Define management by exception and give an example of a circumstance where it might be used.
Briefly discuss two ways in which the effectiveness of a management information system can be determined.
Some hospitality enterprise entrepreneurs, even with limited education, have been successfully operating their businesses for many years. They have probably never heard of management by objectives
The following paragraph appeared in a chain motel’s monthly in-house newsletter announcing the creation of a trophy that will be awarded to the motel with the most outstanding performance each
In late January 2006, George Ray, president of Restoration Resort Ltd., is concerned about how he could finance the more than $200,000 he estimates he needs to convert, improve, and expand the
Explain the concept of budgeting?
What are some of the purposes of budgeting?
List and discuss three advantages of budgeting.
Explain the difference between long- and short-term budgeting.
Give an example of:a. A hotel departmental budgetb. A capital budget for a restaurant
Explain the difference between a fixed and a flexible budget.
Two of the steps in the budgeting cycle are:a. Establishing attainable goalsb. Planning to achieve these goals What are the other three steps?
Discuss three possible limiting factors to consider in preparing a budget for a hotel or restaurant.
In projecting sales revenue for breakfast in the coffee shop of a hotel, what factors need to be considered?
List the four items that must be multiplied by each other to forecast total annual food revenue for the dinner period of a restaurant.
List three types of cost that are controllable with ZBB.
Give an example of a decision unit in a hotel’s accounting office and write a one-sentence objective for that decision unit.
Briefly describe the ranking process under ZBB.
Give two advantages and two disadvantages of ZBB.
Briefly explain how the use of a moving average works as a forecasting method.
Using an example, explain what an unfavorable cost variance is.
Using an example, explain what a favorable sales volume variance is.
Explain the difference between a sales volume variance and a quantity variance.
A restaurant has 100 seats with an average turnover of 2.25, with an average check of $12.00. The restaurant is open 312 days a year. What is the estimated sales revenue for the year?
A motel operation has 70 rooms, an occupancy rate of 80 percent, and an average room rate of $68.00. The owner wants you to give an estimate of sales revenue for the month of April. What is the
A motel had budgeted an occupancy of 6,000 rooms with a selling price of $80 per room and a variable housekeeping cost of $3.70 per room.Actual data indicated that a total of 6,240 rooms were sold at
Using the same information in Exercise 9.3, answer the following about the sales revenue:a. What is the budget variance? Is it favorable or unfavorable?b. What is the price variance? Is it favorable
Assume you had a guest count for the first three months of the year: in January the count was 1,480, in February the count was 1,880, and in March the count was 2,400. What was the moving average
You manage a small motel, which has 40 rooms, with an average room rate of $64 on a 70 percent occupancy rate. Fixed costs are $480,000 and the VC per room sold is $6. What do you anticipate your
An 80-seat coffee shop is open for all three meals every day of the year.Calculate sales revenue for the coming year. Seat turnover and average check figures are as follows: Turnover Average Check
Calculate the room revenue for a 60-room motel for the first three months of the year. Assume February is not in a leap year and has 28 days. The following information is given: Room Rate January $
A 70-room motel’s average room rate is $150. Its average occupancy is 72 percent. Fixed costs are $1,360,000 a year and variable costs are$222,222 a year. Calculate the motel’s operating income
A restaurant has budgeted sales revenue of $880,000 for the next year.Variable costs are 70 percent of sales revenue and fixed cost is $244,000.Answer the following questions:a. What are the total
A motel has 30 units. During the month of June, its average room rate is expected to be $90, and its room occupancy 75 percent. In July the owner is planning to raise room rates by 10 percent, and
As the manager of the 80-room motel, you have the responsibility of preparing next year’s budget from the following information:Annual occupancy: 70 percent Average room rate: $88 Variable costs

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