Financial Management and Cost Control Flashcards
6 cards from real CEC practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Financial Management and Cost Control flashcards as text
A restaurant's food cost percentage is calculated as:
Answer: Cost of Goods Sold ÷ Net Sales × 100
Food cost percentage equals Cost of Goods Sold divided by Net Sales multiplied by 100, expressing the portion of revenue consumed by food costs.
A restaurant achieves $40,000 in food sales with a $14,000 cost of goods sold. What is the food cost percentage?
Answer: 35%
$14,000 ÷ $40,000 × 100 = 35% food cost percentage.
Which of the following is a fixed cost in restaurant operations?
Answer: Monthly rent
Fixed costs such as rent remain constant regardless of sales volume, unlike variable costs (food, hourly labor) that fluctuate with business levels.
What is prime cost in foodservice financial management?
Answer: The sum of cost of goods sold and total labor costs
Prime cost equals cost of goods sold (food + beverages) plus total labor costs (wages, benefits, payroll taxes), representing the two largest controllable expense categories.
A well-managed full-service restaurant typically targets a prime cost percentage of:
Answer: 55%–65% of total sales
Industry benchmarks place prime cost for full-service restaurants at 55%–65% of total sales, leaving sufficient margin to cover overhead and generate profit.
An executive chef increases a menu price to offset rising ingredient costs. What is the potential downside of this strategy?
Answer: Guests may perceive reduced value and choose competitors, lowering overall revenue
Price increases risk guest price sensitivity and competitive disadvantage; if covers decline significantly, total revenue and profit may fall despite higher per-item prices.