CEH Budgeting & Inventory Control 2 — Questions and Answers
Question 1: A housekeeping department's budget variance shows actual spending 12% above the planned amount. What is the FIRST corrective action an executive housekeeper should take?
- Immediately reduce all staff hours
- Analyze line items to identify which categories are over budget (Correct answer)
- Request an emergency budget increase from management
- Suspend all non-essential supply purchases
Correct answer: Analyze line items to identify which categories are over budget
Analyzing specific line items identifies the root cause of variance before implementing any corrective measures.
Question 2: Which inventory valuation method assigns the cost of the most recently purchased items to goods used first?
- FIFO (First In, First Out)
- LIFO (Last In, First Out) (Correct answer)
- Weighted Average Cost
- Specific Identification
Correct answer: LIFO (Last In, First Out)
LIFO assigns the most recent purchase costs to items consumed first, which can affect reported costs during periods of inflation.
Question 3: A hotel's housekeeping department uses 450 pounds of laundry chemicals per month. The safety stock is set at 100 pounds and lead time is 5 days with daily usage of 15 pounds. What is the reorder point?
- 75 pounds
- 175 pounds (Correct answer)
- 100 pounds
- 150 pounds
Correct answer: 175 pounds
Reorder point = (daily usage × lead time) + safety stock = (15 × 5) + 100 = 175 pounds.
Question 4: What does the term 'zero-based budgeting' mean in a housekeeping context?
- Carrying a zero balance in the supply fund at month end
- Building each budget cycle from zero, justifying every expense anew (Correct answer)
- Eliminating all discretionary spending categories
- Setting budget targets based on last year's actuals minus 10%
Correct answer: Building each budget cycle from zero, justifying every expense anew
Zero-based budgeting requires every expense to be justified from scratch each cycle rather than using the prior period as a baseline.
Question 5: In a par stock system for linens, what does 'par' refer to?
- The maximum number of items ever held in inventory
- The minimum number of items needed to operate one complete service cycle (Correct answer)
- The total purchase quantity ordered each month
- The number of items currently in circulation on guest floors
Correct answer: The minimum number of items needed to operate one complete service cycle
Par is the standard quantity of linen needed to support one complete operating cycle, ensuring adequate supply without excess.
Question 6: Which cost is considered a FIXED cost for a housekeeping department?
- Guest amenity supplies
- Overtime wages during peak occupancy
- Executive housekeeper's salary (Correct answer)
- Laundry chemical usage
Correct answer: Executive housekeeper's salary
The executive housekeeper's salary remains constant regardless of occupancy levels, making it a fixed cost.
Question 7: A property calculates its cost per occupied room for housekeeping at $18.50. If occupancy rises by 200 rooms in a month with variable costs only, which outcome is most likely?
- Total housekeeping cost decreases due to economies of scale
- Total housekeeping cost increases while cost per occupied room stays stable (Correct answer)
- Cost per occupied room rises proportionally with occupancy
- Fixed costs increase to match the higher occupancy
Correct answer: Total housekeeping cost increases while cost per occupied room stays stable
Variable costs increase with occupancy, raising total costs, while the cost per occupied room remains approximately constant since the rate is variable-driven.
CEH Budgeting & Inventory Control 2
A housekeeping department's budget variance shows actual spending 12% above the planned amount.
What is the FIRST corrective action an executive housekeeper should take?