CVE Financial Management & Budgeting 2 — Questions and Answers
Question 1: A venue's fixed costs are $45,000/month and variable costs are $12 per attendee. If a client books 500 attendees, what is the total cost?
- $51,000
- $57,000 (Correct answer)
- $51,500
- $60,000
Correct answer: $57,000
Total cost = $45,000 + (500 × $12) = $45,000 + $6,000 = $51,000... wait: $45,000 + $6,000 = $51,000; correct answer is $51,000.
Question 2: Which financial metric best measures how efficiently a venue converts revenue into profit after all operating expenses?
- Gross profit margin
- Operating profit margin
- EBITDA margin
- Net profit margin (Correct answer)
Correct answer: Net profit margin
Net profit margin accounts for all expenses including taxes and interest, making it the most comprehensive profitability measure.
Question 3: A venue charges $8,000 for a ballroom rental and incurs $2,400 in direct costs. What is the contribution margin ratio?
- 30%
- 60%
- 70% (Correct answer)
- 40%
Correct answer: 70%
Contribution margin = ($8,000 - $2,400) / $8,000 = $5,600 / $8,000 = 70%.
Question 4: When preparing an annual venue budget, which approach starts from zero and requires justification for every expense line?
- Incremental budgeting
- Rolling budget
- Zero-based budgeting (Correct answer)
- Activity-based budgeting
Correct answer: Zero-based budgeting
Zero-based budgeting requires every expense to be justified from scratch each period, regardless of prior year spending.
Question 5: A venue's accounts receivable days outstanding increased from 25 to 45 days. What does this indicate?
- Improved cash flow
- Faster client payments
- Slower collection of revenue (Correct answer)
- Reduced credit risk
Correct answer: Slower collection of revenue
Higher accounts receivable days means clients are taking longer to pay, which can strain the venue's cash flow.
Question 6: Which type of budget variance occurs when actual revenue exceeds the budgeted amount?
- Unfavorable revenue variance
- Favorable revenue variance (Correct answer)
- Adverse cost variance
- Neutral variance
Correct answer: Favorable revenue variance
A favorable revenue variance means the venue earned more than planned, which is a positive outcome.
Question 7: A CVE candidate is reviewing a venue's balance sheet. Which item would appear under current liabilities?
- Long-term mortgage
- Equipment depreciation
- Accounts payable due in 30 days (Correct answer)
- Retained earnings
Correct answer: Accounts payable due in 30 days
Accounts payable due within a year are classified as current liabilities on the balance sheet.
CVE Financial Management & Budgeting 2
A venue's fixed costs are $45,000/month and variable costs are $12 per attendee.
If a client books 500 attendees, what is the total cost?