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FINAL EXAM STUDY GUIDEThe exam will be 100 multiple choice questions worth 1 pt each. Anything from lecture and powerpoint slides are fair game but the following topics will cover the majority of the information on the final- Review the study guides from Test 1 and Test 2o Use the Answers to the test 1 and 2 key posted on blackboard as a review for the first two tests! - Purpose of a budget o Charts the course for future action; Organizations business plan expressed in financial terms (To plan for decision making, establishing objectives, and setting priorities)- Know the benefits of preparing a budget o Establish specific future goalso Evaluate past activitieso Formulate work planso Forecast available revenueo Predict fund expenditureo Measure actual resultso Identify potential problemso Estimate available funds at end of budget periodo Serve as a public information system- Know the different types of budgets and factors that affect budgets o Operating/Revenue/Expense Budget: A business’s forecasted revenues along with forecasted expenses, usually for a period of one year or less. (Most common in foodservice management) Parts of Operating Budget:- Labor Budget- Total labor cost to be expended for a set period of time (#pplx$)- Material Budget- Projects the cost of raw materials to be used in the production of goods- Overhead Budget- Expected cost of all production costs other than direct materials and labor Factors that affect budgeting:- Historical Trends- Looking at what has happened in the past- Federal and State subsidies- will federal reimbursement rates increase? - Operational/Program Changes- Labor hours haven’t been reduced as the # of customers has decreased, instead work ha expanded to fill the time available. - Increased/Decreased Program Costs- Equipment is getting older and is breaking more frequently (raises planned for employees?)- Changes in Meal prices- will the price of meals increase (will # of people served decrease?)- Know the different methods of budgeting o Top Down- Budgets are prepared by top management and imposed on the lower layers of the organization Expresses performance goals and expectations of top management Can be unrealistic because they do not incorporate the input of the very people who implement themo Bottom Up- Supervisors and middle managers prepare the budgets and then forward them up the chain of command for review and approval.  Tend to be more accurate Positive impact on employee morale because employees assume and active role in providing financial inputto the budgeting processo Incremental- Based on previous years budget Determine what was allocated last year and adjust based on: inflation, labor contracts, profitability, operating losses, restructuring, and reengineering (easy to prepare but not resp. to change)o Zero-Based Budgeting- Serves to identify and eliminate wasteful or obsolete practices Everything on the budget must be justified Each manager prepares estimates of proposed expenses for a specific period of time as though they were being performed for the first time Each activity starts from a budget base of zero  (takes longer, difficult, responsive to change, most effective when restructuring, challenges previous modes, drives managers to rethink all aspects of foodservice operation)o Combination of Incremental and Zero-Based (use some of each principal to create the budget)- Be able to calculate the PPD, meals per labor minute, turnover rate o PPD: Amount to be spent for food for each patient each day 1. Total all food expenses for the month (raw food costs) 2. Estimate number of meals served/month in the facility by either method: Review documentations of meals served daily and total that # OR review your daily census for each day multiply the daily census by 3(3 meals/d) and multiply by the # of days in the month 3. Divide total expenditure for raw food by the # of meals served/month for cost or meal and multiply by 3 for cost per day OR divide AVERAGE census and then by # of days in the montho Meals per labor minute: Total meals produced / Productive labor hours Average is 5.5 meals/labor hours for cafeterias Average is 3.5 meals/labor hours for acute care facilities Average is 5.0 meals/labor hours for extended care facilitieso Turnover Rate: Determine time frame Determine average # of employees working during that time frame Determine how many people left the company over that time frame  Divide the Total # of people who left/average # of total employees= (Decimal number) multiply by a 100 to get a percent value- Understand inventory principles o Take inventory monthly, and review how much is on the shelf. Strive to turn over inventory eachweek- Know ways to decrease the labor and the food budget o FOOD BUDGETo Raw foods (purchasing, receiving, food prep. Service) Lower cost substitutes Standardized recipes Plate waste Pre-packaged and bulk purchaseso Security (employee and guest meals, activities, theft)o Clinical Cost effective menu changes Liberalized diets Food preferences Ordering snacks and supplementso DECREASE LABOR: More than one station responsibility More training Less new hire Termination if necessary- Know the difference between fixed and variable costso Fixed costs- Generally stay the same Ex) insurance, rent, salaried wages, interest and office maintenance Take into account any raises that may be coming to employees or any changes expected in expenses to comeo Variable costs- Expenses that will change or vary depending on sales Ex) cost of goods for resale, cost of labor in some service industries, advertising expenses, commissions, and payroll taxes- Be able to calculate labor cost percentages, any cost to revenue percentages o Labor Cost percentages: (Cost of labor/revenue) Some managers use total payroll costs in this equation (wages, unemployment and workers comp, health insurance, vacation, sick leave and holiday pay, employee meals, training expenses, etc.)- Know what assets, liabilities, revenue, and expenses are o Assets – liabilities = balanceo Revenue- income in the form of cash and accounts receivable, including federal and state reimbursemento Expenses-costs in the form of bills paid and accounts payable- Know ways to increase revenue o Increase # of customers, increase amount of each customer spends, add seating, add drive-thru/take

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