Chapter 9

Analyzing Results Using the Income Statement

Multiple Choice Exam Questions

1. What is the name of the activity that describes the recording and summarizing of a business’s financial data?
2. Analysis
3. Bookkeeping
4. Cost accounting
5. Managerial accounting
6. What is the primary purpose of a uniform system of accounts?
7. To record business revenue
8. To minimize business expenses
9. To ensure a business pays all of its applicable taxes
10. To present financial data usefully and consistently
11. What is the financial information that is listed first on a P&L prepared using the USAR?
12. Sales
13. Profits
14. Prime costs
15. Other expenses
16. What is the financial information that is listed last on a P&L prepared using the USAR?
17. Sales
18. Profits
19. Prime costs
20. Non-controllable expenses
21. The two expenses that are included in the Prime Costs section of a P&L prepared using the USAR are food and
22. labor.
23. beverages.
24. controllable costs.
25. non-controllable costs.
26. Under what expense category is “Depreciation” listed when a P&L is prepared using the USAR?
27. Prime Cost
28. Direct Operating Expense
29. Non-controllable Expense
30. Other Controllable Expense
31. In what section of a P&L prepared using the USAR are an operation’s occupancy costs recorded?
32. Prime costs
33. Controllable expenses
34. Non-controllable expenses
35. General and administrative costs
36. Last month a manager’s operation achieved $60,000 in food sales and $40,000 in beverage sales. The manager’s cost of sales for food was $15,000 and cost of sales for beverages was $8,000. What was the manager’s cost of sales percentage for food last month?
37. 20%
38. 25%
39. 30%
40. 35%
41. What is the formula managers use to calculate a sales variance percentage?
42. (Last period sales - This period sales) ÷ Last period sales = Sales variance %
43. (Last period sales - This period sales) x Last period sales = Sales variance %
44. (This period sales - Last period sales) ÷ Last period sales = Sales variance %
45. (This period sales - Last period sales) x Last period sales = Sales variance %
46. In the last accounting period, an operation achieved total sales of $120,000. The operation’s manager then budgeted a 4.5 percent sales increase for the next accounting period. What will be the manager’s budgeted sales amount for the next accounting period?
47. $124,800
48. $125,400
49. $126,000
50. $126,600
51. An operation had sales this period of $89,775. Last period sales were $85,500. What was the operation’s percentage sales increase for this period when compared to last period?
52. 0.05%
53. 0.5%
54. 5.0%
55. 50%
56. Last month an operation generated $100,000 in food sales and $40,000 in beverage sales. The operation had a cost of sales for food of $35,000. What was the operation’s food cost percentage last month?
57. 25%
58. 30%
59. 35%
60. 40%
61. “Total sales - Total cost of sales” is the formula a manager uses to calculate an operation’s
62. prime cost.
63. gross profit.
64. profit margin.
65. cost of sales percentage.
66. An operation had a beginning beverage inventory of $15,000 for an accounting period and an ending beverage inventory of $19,000 for the period. What was the operation’s average beverage inventory value for the period?
67. $16,000
68. $16,500
69. $17,000
70. $17,500
71. For what food category should inventory turnover in a food service operation be highest?
72. Dried foods
73. Baked goods
74. Frozen foods
75. Canned goods
76. Last year an operation had a cost of food consumed for meats of $310,000. In that year the operation had a beginning meat inventory of $15,000 and ending meat inventory of $16,000. What was the operation’s inventory turnover for meat last year?
77. 20
78. 21
79. 22
80. 23
81. Last month an operation generated $200,000 in food sales and $50,000 in beverage sales. The operation had a cost of sales for beverages of $10,000. What was the operation’s beverage cost percentage last month?
82. 2%
83. 4%
84. 20%
85. 40%
86. When an operation increases it sales, its cost of variable labor
87. increases and its variable labor cost percentage increases.
88. decreases and its variable labor cost percentage increases.
89. decreases and its variable labor cost percentage is unchanged.
90. increases and its variable labor cost percentage is unchanged.
91. When an operation increases it sales, its cost of fixed labor
92. increases and its fixed labor cost percentage increases.
93. increases and its fixed labor cost percentage decreases.
94. is unchanged and its and fixed labor cost percentage increases.
95. is unchanged and its fixed labor cost percentage decreases.
96. A manager calculates labor cost percentages for both fixed and variable labor costs. If there are no staff pay raises, and the manager’s sales increase by five percent, the fixed labor cost percentage should
97. increase and the variable labor cost percentage should decrease.
98. increase and the variable labor cost percentage should be unchanged.
99. decrease and the variable labor cost percentage should increase.
100. decrease and the variable labor cost percentage should be unchanged.
101. In the last quarter an operation had management labor costs of $20,000, staff labor costs of $80,000 and employee benefits costs of $30,000. The operation achieved a 25 percent total labor cost in the last quarter. How much revenue did the operation generate in the last quarter?
102. $325,000
103. $520,000
104. $715,000
105. $905,000
106. What is a cost that would be classified as a controllable other expense if a manager created a P&L using the USAR format?
107. Leases
108. Utilities
109. Debt repayments
110. Mortgage payments
111. What is the formula foodservice managers use to calculate a profit margin?
112. Total sales ÷ Net income = Profit margin
113. Prime cost ÷ Net income = Profit margin
114. Net income ÷ Total sales = Profit margin
115. Prime costs ÷ Total sales = Profit margin
116. What is the formula managers use to calculate a percentage variance when comparing last year’s profits to this year’s profits?
117. (Profits This Year − Profits Last Year) ÷ Profits Last Year = % Variance
118. (Profits Last Year − Profits This Year) ÷ Profits This Year = % Variance
119. (Profits This Year − Profits Last Year) x Profits Last Year = % Variance
120. (Profits Last Year − Profits This Year) x Profits This Year = % Variance
121. Last year an operation had sales of $800,000 and generated a net income of $88,000. What was the operation’s profit margin last year?
122. 8%
123. 11%
124. 13%
125. 15%

True/False Exam Questions

1. Managerial accounting is the process used to document and analyze the sales, expenses, and profits of a business.
   1. True
   2. False
2. A Uniform Systems of Accounts describes the legally required format managers must use when preparing the financial statements of a business.
   1. True
   2. False
3. Cost of Sales is the first numerical entry on a P&L prepared using the USAR.
   1. True
   2. False
4. Prime costs in a restaurant include its food, beverage and labor costs.
   1. True
   2. False
5. The four sections of the USAR are arranged in order on the income statement from most controllable to least controllable.
   1. True
   2. False
6. An operation’s total revenue minus its cost of sales equals the operation’s gross profit.
   1. True
   2. False
7. High beverage inventory turnover rates accompanied by frequent product outages may indicate beverage inventory levels are too small.
   1. True
   2. False
8. Increases in an operation’s revenue should result in an increase in the operation’s variable labor cost percentage.
   1. True
   2. False
9. When using the USAR, occupancy costs in a food service operation are recorded as a Controllable other expense.
   1. True
   2. False
10. An operation’s return on sales (ROS) is also referred to as its profit margin.
    1. True
    2. False