CCA CCA Financial Management & Budgeting 1 — Questions and Answers
Question 1: Which budgeting method builds a new budget from zero each period, requiring justification for every expense?
- Zero-based budgeting (Correct answer)
- Incremental budgeting
- Activity-based budgeting
- Cash-flow budgeting
Correct answer: Zero-based budgeting
Zero-based budgeting starts from a zero base and requires every expense to be justified for each new budget period.
Question 2: Food cost percentage is calculated by dividing cost of food sold by:
- Total labor costs
- Total food revenue (Correct answer)
- Total operating expenses
- Number of covers served
Correct answer: Total food revenue
Food cost percentage = (cost of food sold ÷ total food revenue) × 100.
Question 3: A CCA reviewing a P&L statement notices EBITDA. What does EBITDA measure?
- Earnings before interest, taxes, depreciation, and amortization (Correct answer)
- Estimated budget including tax deductions and adjustments
- Employee benefits, insurance, training, and departmental allowances
- End-of-period balance in tax, depreciation, and accrual accounts
Correct answer: Earnings before interest, taxes, depreciation, and amortization
EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization, reflecting core operational profitability.
Question 4: The break-even point for a foodservice operation is where:
- Profit equals 10% of revenue
- Total revenue equals total costs (Correct answer)
- Fixed costs are paid off
- Variable costs drop below budget
Correct answer: Total revenue equals total costs
Break-even occurs when total revenue exactly equals total costs, resulting in neither profit nor loss.
Question 5: Which cost type remains constant regardless of the volume of meals produced?
- Variable cost
- Semi-variable cost
- Fixed cost (Correct answer)
- Marginal cost
Correct answer: Fixed cost
Fixed costs such as rent and salaried wages do not change with the volume of meals produced.
Question 6: A contribution margin is best defined as:
- Gross profit minus overhead
- Selling price minus variable cost per unit (Correct answer)
- Total revenue minus fixed costs
- Net income after taxes
Correct answer: Selling price minus variable cost per unit
Contribution margin is calculated as selling price minus variable cost per unit, showing how much each unit contributes to covering fixed costs.
CCA CCA Financial Management & Budgeting 1
Which budgeting method builds a new budget from zero each period, requiring justification for every expense?