CHP Financial Management & Budgeting 3 — Questions and Answers
Question 1: Which of the following is classified as a fixed cost in hotel operations?
- Housekeeping labor for occupied rooms
- Guest amenities
- Property insurance premiums (Correct answer)
- Laundry supplies
Correct answer: Property insurance premiums
Property insurance premiums remain constant regardless of occupancy level, making them a fixed cost.
Question 2: A budget variance analysis shows actual spending was $12,000 versus a budgeted $10,000. This is best described as a:
- Favorable variance of $2,000
- Unfavorable variance of $2,000 (Correct answer)
- Neutral variance
- Positive variance of $2,000
Correct answer: Unfavorable variance of $2,000
When actual costs exceed budgeted costs, the variance is unfavorable (adverse) because more was spent than planned.
Question 3: In the Uniform System of Accounts for the Lodging Industry (USALI), which department is typically listed first?
- Food & Beverage
- Rooms (Correct answer)
- Spa
- Telecommunications
Correct answer: Rooms
Under USALI, the Rooms department is listed first as it is typically the largest revenue-generating department.
Question 4: EBITDA stands for earnings before interest, taxes, depreciation, and:
- Distribution
- Amortization (Correct answer)
- Administration
- Allocation
Correct answer: Amortization
EBITDA = Earnings Before Interest, Taxes, Depreciation, and Amortization — a common measure of operating performance.
Question 5: A hotel manager uses the '52/48 rule' for labor scheduling. This primarily helps control:
- Food cost percentage
- Overtime expenses (Correct answer)
- Rooms revenue
- Utility costs
Correct answer: Overtime expenses
The 52/48 scheduling rule staggers shifts to minimize overtime by ensuring 52 hours of coverage with 48-hour employee schedules.
Question 6: Which ratio measures how efficiently a hotel converts revenue into profit by comparing net income to total revenue?
- Current ratio
- Debt-to-equity ratio
- Net profit margin (Correct answer)
- Return on assets
Correct answer: Net profit margin
Net profit margin = (net income ÷ total revenue) × 100, showing the percentage of revenue retained as profit.
Question 7: In capital budgeting, the payback period is defined as:
- The time required to earn back the initial investment from cash flows (Correct answer)
- The interest rate that makes NPV equal to zero
- The total profit earned over an asset's life
- The annual depreciation of a capital asset
Correct answer: The time required to earn back the initial investment from cash flows
The payback period is the length of time needed to recover the original capital investment from net cash inflows.
CHP Financial Management & Budgeting 3
Which of the following is classified as a fixed cost in hotel operations?