CHI Financial Accounting in Hospitality 3 — Questions and Answers
Question 1: A property's total fixed costs are $200,000 per month and its contribution margin per occupied room is $80. What is the break-even number of rooms?
- 1,600 rooms
- 2,500 rooms (Correct answer)
- 4,000 rooms
- 1,000 rooms
Correct answer: 2,500 rooms
Break-even units = Fixed Costs ÷ Contribution Margin = $200,000 ÷ $80 = 2,500 rooms.
Question 2: Which depreciation method results in higher depreciation expense in the early years of an asset's life?
- Straight-line depreciation
- Units-of-production method
- Double-declining balance method (Correct answer)
- Sum-of-years-digits method divided by 2
Correct answer: Double-declining balance method
Double-declining balance is an accelerated depreciation method that records higher expense in early years.
Question 3: On a hotel income statement, 'Gross Operating Profit' (GOP) is calculated as:
- Total revenue minus cost of goods sold
- Total revenue minus total departmental expenses and undistributed expenses (Correct answer)
- Net income before taxes
- EBITDA minus depreciation
Correct answer: Total revenue minus total departmental expenses and undistributed expenses
GOP equals total revenue less departmental expenses and undistributed operating expenses per USALI.
Question 4: A front desk agent collects a $200 cash advance from a guest. How should this transaction be recorded?
- Debit Cash, Credit Revenue
- Debit Guest Ledger, Credit Cash
- Debit Cash, Credit Guest Deposit Liability (Correct answer)
- Debit Revenue, Credit Cash
Correct answer: Debit Cash, Credit Guest Deposit Liability
A cash advance is a liability until earned; debit Cash and credit Guest Deposit Liability.
Question 5: Which ratio measures a hotel's ability to meet short-term obligations using its most liquid assets?
- Debt-to-equity ratio
- Current ratio
- Quick ratio (Correct answer)
- Asset turnover ratio
Correct answer: Quick ratio
The quick ratio excludes inventory and prepaid expenses, using only the most liquid assets to assess short-term solvency.
Question 6: In hospitality, the term 'yield management' is most closely related to which financial objective?
- Minimizing food costs
- Maximizing revenue per available room (Correct answer)
- Reducing labor turnover costs
- Lowering depreciation expense
Correct answer: Maximizing revenue per available room
Yield management (revenue management) aims to maximize RevPAR by optimizing pricing and occupancy.
Question 7: When a hotel chef receives a vendor invoice for $3,500 worth of produce, which account is debited?
- Accounts Payable
- Food Inventory (or Food Purchases) (Correct answer)
- Cash
- Accounts Receivable
Correct answer: Food Inventory (or Food Purchases)
Receiving inventory on credit debits Food Inventory/Purchases and credits Accounts Payable.
CHI Financial Accounting in Hospitality 3
A property's total fixed costs are $200,000 per month and its contribution margin per occupied room is $80.
What is the break-even number of rooms?