Use the table below to answer the question. All numbers in local currency. Assume indirect costs are allocated according to the value of equipment in each department. Cleaning has 75,000 worth of equipment and Catering has 300,000. That would mean: \[\begin{array} { | l | l | l | l | } \hline & \text { Cleaning } & \text { Catering } & \text { Total } \\ \hline \text { Sales Revenue } & 195,000 & 455,000 & 650,000 \\ \hline \text { Direct costs } & 165,000 & 300,000 & 465,000 \\ \hline \text { Contribution } & & & \\ \hline \text { Indirect Costs } & & & 105,000 \\ \hline \text { Operating Income } & & & \\ \hline \end{array}\]

A) Catering makes a profit of 65,000 and Cleaning makes a profit of 15,000. B) Catering makes a profit of 71,000 and Cleaning makes a profit of 9,000. C) Catering makes a profit of 76,700 and Cleaning makes a profit of 3,300. D) Catering makes a profit of 85,200 and Cleaning makes a loss of 5,200. A) Catering makes a profit of 65,000 and Cleaning makes a profit of 15,000. B) Catering makes a profit of 71,000 and Cleaning makes a profit of 9,000. C) Catering makes a profit of 76,700 and Cleaning makes a profit of 3,300. D) Catering makes a profit of 85,200 and Cleaning makes a loss of 5,200. B

A company has the following estimated costs for the next financial year (see table). The firm estimate they will produce and sell 140,000 units in the next financial year. If they use a Variable Cost Mark-Up of 80%, what will their selling price be? \[\begin{array} { | l | l | } \hline \text { Direct materials } & 1,300,000 \\ \hline \text { Direct labour } & 2,195,000 \\ \hline \text { Mortgage Repayments } & 725,000 \\ \hline \text { Property Taxes } & 245,000 \\ \hline \begin{array} { l } \text { General Headquarters \& Administration } \\ \text { Expenses } \end{array} & 765,000 \\ \hline \text { Other Overhead Expenses } &580,000 \\ \hline \text { Other Variable Costs } &460,000 \\ \hline \end{array}\]

A) 50.85 B) 68.44 C) 76.75 D) 91.68 A) 50.85 B) 68.44 C) 76.75 D) 91.68 A

The Queen's Arms Hotel's year-end sales and costs figures are in the table - all in local currency. The owner wants to close during low season, but the assistant manager suggests keeping open is better. Who is right? \[\begin{array} { | l | l | l | l | } \hline & 9 \text { months } & 3 \text { months } & \text { Total } \\ \hline \text { Sales } & 450,000 & 50,000 & 500,000 \\ \hline \text { Direct costs } & 200,000 & 22,000 & 222,000 \\ \hline \text { Contribution } & 250,000 & 28,000 & 278,000 \\ \hline \text { Indirect costs } & 170,000 & 30,000 & 200,000 \\ \hline \text { Operating income } & 80,000 & 2,000 & 78,000 \\ \hline \end{array}\]

A) The assistant manager is right, as closing for the 3-month low season would cause total operating income to fall to 50,000 B) The assistant manager is right, as closing for the 3-month low season would cause total operating income to fall to 20,000. C) The owner is right, as closing for the 3-month low season would cause total operating income to rise to 80,000 D) The owner is right, as closing for the 3-month low season would cause total operating income to rise to 250,000 A) The assistant manager is right, as closing for the 3-month low season would cause total operating income to fall to 50,000 B) The assistant manager is right, as closing for the 3-month low season would cause total operating income to fall to 20,000. C) The owner is right, as closing for the 3-month low season would cause total operating income to rise to 80,000 D) The owner is right, as closing for the 3-month low season would cause total operating income to rise to 250,000

Exam 3: Pricing

Use the table below to answer the question. All numbers in local currency. Assume indirect costs are allocated according to the value of equipment in each department. Cleaning has 75,000 worth of equipment and Catering has 300,000. That would mean: Cleaning Catering Total Sales Revenue 195,000 455,000 650,000 Direct costs 165,000 300,000 465,000 Contribution Indirect Costs 105,000 Operating Income

Free

(Multiple Choice)

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Question 1

Correct Answer:

Verified

B

A company has the following estimated costs for the next financial year (see table). The firm estimate they will produce and sell 140,000 units in the next financial year. If they use a Variable Cost Mark-Up of 80%, what will their selling price be? Direct materials 1,300,000 Direct labour 2,195,000 Mortgage Repayments 725,000 Property Taxes 245,000 General Headquarters \& Administration Expenses 765,000 Other Overhead Expenses 580,000 Other Variable Costs 460,000

Free

(Multiple Choice)

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Question 2

Correct Answer:

Verified

A

How are hotel rooms 'perishable goods'?

Free

(Multiple Choice)

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Question 3

Correct Answer:

Verified

C

The price elasticity of demand for a good is 2.1. What is the percentage change in quantity demanded if there is a 3.6% rise in price?

(Multiple Choice)

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Question 4

A company has fixed costs of €185,000 and variable costs of €10 per unit. What are the costs per unit if: i) 25,000 units are produced and ii) 65,000 units are produced?

(Multiple Choice)

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Question 5

An overhead expense of $ 535,000 is allocated to three departments A, B and C as 1.5 : 2.0 : 3.5. respectively. How much would be allocated to department B?

(Multiple Choice)

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Question 6

The Queen's Arms Hotel's year-end sales and costs figures are in the table - all in local currency. The owner wants to close during low season, but the assistant manager suggests keeping open is better. Who is right? 9 months 3 months Total Sales 450,000 50,000 500,000 Direct costs 200,000 22,000 222,000 Contribution 250,000 28,000 278,000 Indirect costs 170,000 30,000 200,000 Operating income 80,000 2,000 78,000

(Multiple Choice)

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Question 7

A small family-run, 60-room hotel is open all the year round. Variable costs per guest are $ 15 and total annual overhead $ 1.6 million. Rooms division absorbs 60% of the overheads and occupancy is expected to be 55%. If the hotel has a desired mark up of 35%, how much would they charge for a room?

(Multiple Choice)

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Question 8

You are in charge of the local city-owned leisure centre and have been charged with increasing its revenue. The Mayor advises you to decrease the price of a day pass. The City Manager recommends increasing the price of a day pass. What does this tell you about their understanding of price elasticity of demand?

(Multiple Choice)

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Question 9

Which of the following types of costs is generally allocated among different revenue generating departments (or cost centres)?

(Multiple Choice)

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Question 10

Indirect costs: i) can usually be traced to a specific operation; ii) normally appear in the "Cost of Sales" section of an Income Statement; iii) tend to be associated with fixed costs; iv) tend not to change as output changes. Which of these statements are correct?

(Multiple Choice)

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Question 11

What is the Hubbart Formula?

(Multiple Choice)

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Question 12

A restaurant uses the Desired Ingredient Cost Mark-Up (DICMU) method of menu pricing. They have a policy of ensuring that for all meals ingredients cost 12.5% of the overall menu price. The table has the purchase prices of a beef dish (all in local currency). What price will the restaurant charge for this meal? A. 5.6 B. 18.1 C. 44.8 D. 70

(Short Answer)

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Question 13

A hotel's owners desire a return of 20% (after tax) on their investment of 10 million dollars. If corporation tax is 37.5%, what is the required income before tax?

(Multiple Choice)

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Question 14

One year a restaurant sells 83,000 meals at an average price of $ 21. If variable costs are $ 12 and fixed costs $ 529,000, what is the contribution?

(Multiple Choice)

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Question 15

How are hotel rooms 'perishable goods'?

The price elasticity of demand for a good is 2.1. What is the percentage change in quantity demanded if there is a 3.6% rise in price?

A company has fixed costs of €185,000 and variable costs of €10 per unit. What are the costs per unit if: i) 25,000 units are produced and ii) 65,000 units are produced?

An overhead expense of $ 535,000 is allocated to three departments A, B and C as 1.5 : 2.0 : 3.5. respectively. How much would be allocated to department B?

A small family-run, 60-room hotel is open all the year round. Variable costs per guest are $ 15 and total annual overhead $ 1.6 million. Rooms division absorbs 60% of the overheads and occupancy is expected to be 55%. If the hotel has a desired mark up of 35%, how much would they charge for a room?

Which of the following types of costs is generally allocated among different revenue generating departments (or cost centres)?

Indirect costs: i) can usually be traced to a specific operation; ii) normally appear in the "Cost of Sales" section of an Income Statement; iii) tend to be associated with fixed costs; iv) tend not to change as output changes. Which of these statements are correct?

What is the Hubbart Formula?

A hotel's owners desire a return of 20% (after tax) on their investment of 10 million dollars. If corporation tax is 37.5%, what is the required income before tax?

One year a restaurant sells 83,000 meals at an average price of $ 21. If variable costs are $ 12 and fixed costs $ 529,000, what is the contribution?

Measuring Performance

Balance Sheet and Ratios

Finance Accounting in Food and Beverage

Capital Budgeting

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