NAMA Financial Management & Pricing 3 — Questions and Answers
Question 1: A vending route generates $8,000/month in revenue. Fixed costs are $2,000 and variable costs are 45% of revenue. What is the monthly operating profit?
- $1,600
- $2,400 (Correct answer)
- $3,000
- $4,400
Correct answer: $2,400
Operating profit = $8,000 - $2,000 - ($8,000 × 0.45) = $8,000 - $2,000 - $3,600 = $2,400.
Question 2: Which term describes the minimum level of sales a vending location must generate to justify keeping a machine there?
- Sales ceiling
- Revenue cap
- Location threshold
- Break-even point (Correct answer)
Correct answer: Break-even point
The break-even point is where a location's revenue exactly covers the costs of servicing it, below which the machine is unprofitable.
Question 3: What does ROI stand for and how is it calculated in vending?
- Rate of Income; profit divided by expenses
- Return on Investment; net profit divided by total investment cost (Correct answer)
- Revenue over Inventory; sales divided by stock value
- Rate of Inventory; units sold divided by units stocked
Correct answer: Return on Investment; net profit divided by total investment cost
ROI (Return on Investment) = Net Profit / Total Investment Cost, expressed as a percentage.
Question 4: A vending machine purchased for $3,500 has a 7-year useful life and no salvage value. Using straight-line depreciation, what is the annual depreciation expense?
- $350
- $500 (Correct answer)
- $700
- $875
Correct answer: $500
Annual depreciation = $3,500 / 7 years = $500 per year.
Question 5: In vending pricing, what is a 'value-added' pricing approach?
- Pricing products below competitor rates
- Pricing based on the perceived benefit or convenience delivered to the customer (Correct answer)
- Adding sales tax to all product prices
- Setting prices equal to cost plus a fixed dollar amount
Correct answer: Pricing based on the perceived benefit or convenience delivered to the customer
Value-added pricing sets prices according to the convenience, accessibility, or unique benefits that vending provides to the customer.
Question 6: Which ratio measures how quickly a vending operator collects payment from commission-based accounts?
- Inventory turnover ratio
- Accounts receivable turnover ratio (Correct answer)
- Debt-to-equity ratio
- Current ratio
Correct answer: Accounts receivable turnover ratio
Accounts receivable turnover ratio measures how efficiently a business collects its outstanding receivables.
Question 7: An operator offers a location owner 10% commission on $2,500 monthly sales. How much commission is owed?
- $25
- $150
- $250 (Correct answer)
- $500
Correct answer: $250
Commission = 10% × $2,500 = $250.
NAMA Financial Management & Pricing 3
A vending route generates $8,000/month in revenue.
Fixed costs are $2,000 and variable costs are 45% of revenue.
What is the monthly operating profit?