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Final Exam Study Guide HFT3424Key Points from Test 1 Know the basic ratios and equationso Profit= Total Revenue – Total Expenseso Assets = Liabilities + Owner’s Equityo Profit Margin (percentage) = Profit/Sales If sales were 100,000 and expenses were 60,000100,000 - 60,000= 40,000The percentage is 40,000/100,000= 40%  Lets just say Bill’s bookstore sells $1,000 in T-shirts on game day. The labor costs = $500; the t-shirts’ cost = $300; other expenses= $200.• Because the costs add up to $1,000, no profit was made, therefore the profit margin is equal to 0%o Cost of Goods Sold = COGS/Sales Cost of goods sold when food sales are $1,000; labor costs= $600; overhead Expenses= $100; and food costs= $300• The only numbers that matter are food sales and food costs• = 300/1,000= 30% Determine the total cost of goods sold for alcohol when total sales= $1000; beer = 19%; liquor = 32%; wine = 33%• There is not enough information to tell because you can’t just add up the percentages to get the total. The sales and prices of each one are unknown given just the percentage. You KNOW for a fact that the costs of all alcohol can’t be the same! • Now if the question said:o Beer Sales were $ 500 at 19%Wine Sales were $2,500 at 33%Liquor Sales were $700 at 32% you can calculate the COGS for all alcoholo 500 x .19 = $952,500 x .33 = $825700 x .32 = $224o Add the totals. COGS for alcohol= 95+825+224 =1144Total sales= 500+2,500+700= 3,700o COGS/Sales = 1144/3700 = .3091 = 31.91%o Occupancy Rate percentage = Rooms sold/rooms available If there are 200 rooms in the hotel and room rates are discounted to $85 per night with 120 rooms sold what is the occupancy rate percentage?• The room rate does not matter, don’t let occupancy “rate” confuse you• 120/200 = .6• The occupancy rate percentage is 60%o Average Daily Rate = Room Revenue/Rooms sold This season Hotel Duval has room rates for $130 per night, if they sold 40 out of their 100 rooms what is the average daily rate?• Remember that you must calculate the room revenue first, if not given• So, room revenue= room rate times room sold = 130 x 40= 5200• 5200/40 = 130• OR you may realize that in the question, the room rate was given, so all the calculating was really not necessary! • If Hotel Duval makes $5,500 in room revenue and sells 40 of its 100 rooms, then you would calculate:o 5,500/40 = 137.5 = average daily rateo Debt Ratio = Liabilities/Member Equity Publix has taxes payable and salaries payable accounts totaling 200,000. Owner’s Equity accounts total 1,000,000• The debt ratio is 200,000/1,000,000 = .2o Covers per hour Total covers/ number of operating hours Cancun’s has 300 covers on a Thursday night in which they’re only open 4 hours. • 300/4 = 75 covers per houro Turn Rate (Seat Turnover) = Total covers/number of seats With the average price of $2.00 per drink, Prime Time sold 600 covers in their 120 available seats in a matter of 3 hours. What is the turn rate?• 600/120 = 5 • Always remember that there will be extra numbers in the questions that aren’t needed to find the answero Inventory Turn Rate = Cost of Inventory Sold/Average Inventory Given:• $10,000 in food sales40% COGS$800 average inventory• Find food costs: 10,000 x .4 = 4,000• 4,000/800 = 5 = Turn rateo Breakeven = Fixed Costs/(Sales price- variable costs)  Monthly fixed costs for a hotel is $60,000 and rooms sell for $250 a night with variable costs of $50 per night• 60,000/(250-50) = 60,000/200 = 300• This means that 300 rooms must be sold to breakeveno Return on Member’s Equity = Net Profit/Total Member’s Equity• Remember, Profit is not the same as sales! So if the question said sales/member’s equity it would be incorrect.  Financial Statementso Balance Sheet Indicates the efficiency and profitability of an operation Includes all assets (cash, inventory, receivable accounts, buildings, etc) liabilities (all accounts payable, depreciation,) and owner’s equity (stocks, retained earnings) Capitol Expenses would be found on the balance sheet. You may think because it is an expense it would be on the income statement, but it is considered an ASSET.  Principle such as mortgage for a house or a car builds equity, so it would be found on the balance sheet as wello Income Statement  The Profit and Loss Statement Includes all revenue (income, which includes sales), profits and expenses  Includes electricity expense, green fee revenue, interest expense (because it is a financial expense)o Statement of Cash Flows Reports the cash generated and used during the time interval specified in its heading Includes operating, investing and financing activities The Types of Costso Fixed Costs Those that do not vary with revenue over the short run (usually a year or less). Over the long run all these costs can change. Ex) Property tax, insurance expense, rent, interest expense, etco Variable costs Those one that increases or decreases in direct, or linear, fashion with increases or decreases in sales.  Ex) The costs of food and beverage. o Semifixed or Semivariable cost: Most have an element of fixed expense and an element of variable expense-most expenses do not have a direct relationship to sales on a straight-line basis. Ex) Labor cost: management salaries + hourly staff wage Benchmarkso Numbers have to be compared to other numbers to have meaning! o Reasonable benchmarks: Restaurants: around 60%• A low percentage like 5% is not reasonable, this means the operations are below standard and not achieving efficiency Clubs: 50% Key Facts to remembero The largest expense for most restaurants is labor and cost of goods soldo It is NOT the GM’s responsibility to check every number on each of the statementso Financial Management Cycle 1. Operations produce the numbers2. Accountants prepare the numbers and provide management reports and financial statements3. Accounting and Operations analyze the numbers4. Operations apply the numbers back to the businessKey Points from Test 2 Prime costo = Direct materials + direct laboro For a restaurant, this would be the summation of the food and beverage costs and the labor costso From the table below (that I came up with), the prime cost would be: $425,000 + $330,000 =$755,000 DESCRIPTION DOLLARS PERCENTAGESRevenues $1,000,000 100%Food and Beverage

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FSU HFT 3424 - Final Exam

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