CPCE Financial Management & Budgeting Flashcards

What is 'food cost percentage' and what is the typical target range for US catered events?

Answer: Food cost as a % of selling price, typically 28–35%

Food cost percentage is calculated as (cost of food sold ÷ food revenue) × 100, with 28–35% being the accepted target range for profitable catering operations.

In US catering, what does the term 'guaranteed guest count' mean in a contract?

Answer: The minimum number of guests the client guarantees to pay for, regardless of actual attendance

The guaranteed count is the minimum number the client is contractually obligated to pay for, protecting the caterer from significant last-minute attendance drops.

Which cost category is considered a 'fixed cost' for a catering operation?

Answer: Monthly kitchen facility lease payments

Fixed costs like lease payments remain constant regardless of event volume, while variable costs like food, labor, and disposables fluctuate with each event.

What is the purpose of a 'contribution margin' calculation in catering financial planning?

Answer: To determine how much revenue remains after variable costs to cover fixed costs and profit

Contribution margin (revenue minus variable costs) shows how much each event contributes toward covering fixed overhead and generating net profit.

What does 'break-even analysis' help a caterer determine?

Answer: The minimum revenue needed to cover all costs before earning a profit

Break-even analysis calculates the revenue level at which total costs equal total income, below which the operation runs at a loss.

In a catering proposal, what is the difference between a 'per-head price' and an 'all-inclusive package price'?

Answer: Per-head pricing multiplies a per-guest rate by attendance; all-inclusive bundles all services into one flat fee

Per-head pricing scales with attendance while all-inclusive packages offer a fixed total price bundling food, beverage, staffing, and equipment for client simplicity.