CRP Financial Planning & Budgeting 2

Question 1

A restaurant's prime cost ratio is 62%. If total sales are $85,000, what is the prime cost?

Accepted Answer

$52,700

Answer

Prime cost = 62% × $85,000 = $52,700, which covers labor and cost of goods sold combined.

Question 2

Which budgeting method builds each period's budget from zero, requiring justification for every expense?

Accepted Answer

Zero-based budgeting

Answer

Zero-based budgeting starts from scratch each cycle, forcing managers to justify all costs rather than simply adjusting prior-period figures.

Question 3

A restaurant spends $4,200 on food to generate $14,700 in food sales. What is the food cost percentage?

Accepted Answer

28.6%

Answer

Food cost % = ($4,200 ÷ $14,700) × 100 = 28.6%, which falls within the typical target range.

Question 4

What does a cash flow statement primarily show restaurant operators?

Accepted Answer

The timing of cash inflows and outflows

Answer

A cash flow statement tracks when cash enters and leaves the business, which is critical for managing liquidity independent of profitability.

Question 5

Which metric measures how many times a restaurant turns over its food inventory within a given period?

Accepted Answer

Inventory turnover ratio

Answer

Inventory turnover ratio = Cost of Goods Sold ÷ Average Inventory, indicating how efficiently perishable stock is being used.

(CRP) Certified Restaurant Professional Practice Test