CHP Financial Management & Budgeting 2 — Questions and Answers
Question 1: A hotel's RevPAR is $85 and its ADR is $120. What is the hotel's occupancy rate?
- 70.8% (Correct answer)
- 64.1%
- 58.3%
- 75.0%
Correct answer: 70.8%
RevPAR ÷ ADR = occupancy rate: $85 ÷ $120 = 70.8%.
Question 2: Which budgeting method requires every expense to be justified from zero each budget cycle?
- Incremental budgeting
- Zero-based budgeting (Correct answer)
- Rolling budgeting
- Activity-based budgeting
Correct answer: Zero-based budgeting
Zero-based budgeting (ZBB) starts from scratch each period, requiring justification for all expenditures rather than adjusting prior-year figures.
Question 3: In hospitality, 'flow-through' refers to:
- The percentage of revenue that reaches GOP after variable costs (Correct answer)
- Cash moving between departments
- The rate at which reservations convert to arrivals
- Payroll taxes flowing to the government
Correct answer: The percentage of revenue that reaches GOP after variable costs
Flow-through measures what percentage of incremental revenue drops to the GOP line after covering variable costs.
Question 4: A restaurant has total revenue of $500,000 and a food cost of $175,000. What is the food cost percentage?
- 28.6%
- 35.0% (Correct answer)
- 40.0%
- 25.0%
Correct answer: 35.0%
Food cost % = (food cost ÷ revenue) × 100 = ($175,000 ÷ $500,000) × 100 = 35%.
Question 5: Which financial statement shows a hotel's assets, liabilities, and owner's equity at a specific point in time?
- Income statement
- Cash flow statement
- Balance sheet (Correct answer)
- Statement of retained earnings
Correct answer: Balance sheet
The balance sheet (statement of financial position) presents assets, liabilities, and equity at a single date.
Question 6: A hotel's variable cost per occupied room is $35 and the ADR is $110. What is the contribution margin per room?
- $145
- $75 (Correct answer)
- $35
- $110
Correct answer: $75
Contribution margin = ADR − variable cost = $110 − $35 = $75.
Question 7: The GOP PAR metric stands for:
- Gross Operating Profit Per Available Room (Correct answer)
- General Operating Percentage Against Revenue
- Gross Output Projection And Reporting
- General Overhead Per Annual Revenue
Correct answer: Gross Operating Profit Per Available Room
GOP PAR (Gross Operating Profit Per Available Room) measures profitability per available room regardless of occupancy.
CHP Financial Management & Budgeting 2
A hotel's RevPAR is $85 and its ADR is $120.
What is the hotel's occupancy rate?