CDM CDM Inventory, Costing & Business Operations 1 — Questions and Answers
Question 1: What is the formula for calculating the food cost percentage of a doughnut product?
- (Ingredient cost ÷ Selling price) × 100 (Correct answer)
- (Selling price ÷ Ingredient cost) × 100
- (Labor cost ÷ Selling price) × 100
- (Overhead ÷ Ingredient cost) × 100
Correct answer: (Ingredient cost ÷ Selling price) × 100
Food cost percentage is calculated by dividing the total ingredient cost by the selling price and multiplying by 100 to express it as a percent.
Question 2: In a bakery, what does FIFO stand for and why is it used?
- First In, First Out — to ensure oldest inventory is used before newer stock (Correct answer)
- First In, Final Output — to track production order
- Fresh Ingredients, Fresh Output — a quality standard
- Frozen Inventory, Fresh Output — a cold chain protocol
Correct answer: First In, First Out — to ensure oldest inventory is used before newer stock
FIFO ensures that the oldest ingredients are used first, reducing spoilage, waste, and the risk of using expired products.
Question 3: Which document is used to record the amount of each ingredient used in a standard batch of doughnuts?
- A standardized recipe card (Correct answer)
- A purchase order
- An invoice
- A production schedule
Correct answer: A standardized recipe card
A standardized recipe card specifies exact ingredient quantities per batch, ensuring consistency and enabling accurate food cost calculations.
Question 4: What does 'yield percentage' refer to when calculating ingredient costs for doughnuts?
- The usable portion of an ingredient after trimming or processing compared to the as-purchased amount (Correct answer)
- The number of doughnuts produced per hour
- The percentage of revenue kept as profit
- The ratio of glaze to dough by weight
Correct answer: The usable portion of an ingredient after trimming or processing compared to the as-purchased amount
Yield percentage accounts for the loss that occurs during ingredient preparation, ensuring accurate cost calculations based on usable ingredient amounts.
Question 5: A baker produces 120 doughnuts per batch and the total ingredient cost is $36. What is the ingredient cost per doughnut?
- $0.30 (Correct answer)
- $0.25
- $0.40
- $0.36
Correct answer: $0.30
Dividing the total batch cost ($36) by the number of units (120) gives an ingredient cost of $0.30 per doughnut.
Question 6: What is the purpose of a par level in bakery inventory management?
- It sets the minimum stock quantity that triggers a reorder (Correct answer)
- It defines the maximum daily production output
- It measures the quality standard of finished goods
- It records daily sales figures for each product
Correct answer: It sets the minimum stock quantity that triggers a reorder
A par level is the minimum on-hand quantity for an ingredient; when stock falls to or below this level, a reorder is placed to prevent stockouts.
CDM CDM Inventory, Costing & Business Operations 1
What is the formula for calculating the food cost percentage of a doughnut product?