Event Management Event Budgeting and Finance 1 — Questions and Answers
Question 1: Which budgeting method starts from zero each period, requiring justification for every expense?
- Incremental budgeting
- Zero-based budgeting (Correct answer)
- Activity-based budgeting
- Rolling budget
Correct answer: Zero-based budgeting
Zero-based budgeting requires every expense to be justified from scratch rather than using prior period figures as a baseline.
Question 2: What percentage of an event budget is typically recommended as a contingency reserve?
- 1–3%
- 5–10% (Correct answer)
- 15–20%
- 25–30%
Correct answer: 5–10%
Industry best practice recommends setting aside 5–10% of the total event budget as a contingency fund for unexpected costs.
Question 3: A master service agreement (MSA) with a venue typically locks in which financial term?
- Guest count guarantees
- Attrition clauses (Correct answer)
- Speaker fees
- Marketing spend
Correct answer: Attrition clauses
Attrition clauses in MSAs specify the minimum spend or room block the event planner must meet or face financial penalties.
Question 4: Which cost is classified as a fixed cost in event budgeting?
- Catering per head
- Printing per attendee
- Venue rental fee (Correct answer)
- Shuttle rides per person
Correct answer: Venue rental fee
A venue rental fee stays the same regardless of attendance numbers, making it a fixed cost in the event budget.
Question 5: What document itemizes all projected revenues and expenses for an event before it takes place?
- Post-event report
- Pro forma budget (Correct answer)
- Balance sheet
- Cash flow statement
Correct answer: Pro forma budget
A pro forma budget is a forward-looking financial document that estimates all expected revenues and expenses for the event.
Question 6: When calculating the break-even point for a ticketed event, which formula is correct?
- Fixed costs ÷ ticket price
- Fixed costs ÷ (ticket price – variable cost per attendee) (Correct answer)
- Total revenue – total expenses
- Variable costs × expected attendance
Correct answer: Fixed costs ÷ (ticket price – variable cost per attendee)
Break-even attendance equals fixed costs divided by the contribution margin (ticket price minus variable cost per attendee).
Event Management Event Budgeting and Finance 1
Which budgeting method starts from zero each period, requiring justification for every expense?