CRM Financial Management 2 — Questions and Answers
Question 1: A restaurant's prime cost ratio is 68%. If total sales are $50,000, what is the prime cost?
- $32,000
- $34,000 (Correct answer)
- $36,000
- $38,000
Correct answer: $34,000
Prime cost = 68% × $50,000 = $34,000.
Question 2: Which financial document shows a restaurant's revenue, costs, and profit over a specific time period?
- Balance sheet
- Cash flow statement
- Profit and loss statement (Correct answer)
- Accounts payable ledger
Correct answer: Profit and loss statement
The profit and loss (P&L) statement summarizes revenues and expenses over a defined period.
Question 3: What does a restaurant's 'contribution margin' represent?
- Total revenue minus fixed costs
- Revenue minus variable costs (Correct answer)
- Net profit after taxes
- Gross sales minus returns
Correct answer: Revenue minus variable costs
Contribution margin equals revenue minus variable costs, showing how much covers fixed costs and profit.
Question 4: A restaurant has fixed costs of $20,000/month and a contribution margin ratio of 40%. What is the break-even sales volume?
- $40,000
- $50,000 (Correct answer)
- $60,000
- $80,000
Correct answer: $50,000
Break-even = Fixed costs ÷ Contribution margin ratio = $20,000 ÷ 0.40 = $50,000.
Question 5: Which metric measures how efficiently a restaurant converts revenue into actual cash?
- Gross margin
- Operating cash flow (Correct answer)
- Net profit margin
- Return on assets
Correct answer: Operating cash flow
Operating cash flow measures actual cash generated from restaurant operations, separate from accounting profit.
Question 6: If a menu item costs $4.50 to produce and is sold for $16.00, what is its food cost percentage?
- 24.1%
- 26.5%
- 28.1% (Correct answer)
- 30.0%
Correct answer: 28.1%
Food cost % = ($4.50 ÷ $16.00) × 100 = 28.1%.
Question 7: What is 'accounts payable' in a restaurant context?
- Money owed to the restaurant by customers
- Money the restaurant owes to suppliers and vendors (Correct answer)
- Employee wages waiting to be paid
- Outstanding loan balances
Correct answer: Money the restaurant owes to suppliers and vendors
Accounts payable represents money the restaurant owes to suppliers, vendors, and creditors for goods or services received.
CRM Financial Management 2
A restaurant's prime cost ratio is 68%.
If total sales are $50,000, what is the prime cost?