BIRMINGHAM COLLEGE OF FOOD, TOURISM AND CREATIVE STUDIES

Event Finance Multi Choice Exam

Practice Questions

Section A - Pricing Theory

Question 1Which of the following statements best defines a fixed cost?A. A fixed cost is set at the beginning of the year and will not changeB. A fixed cost is fixed for one level of sales volumeC. A fixed cost will not change directly in proportion with sales volume

D. A fixed cost behaves in the same way as a marginal costE. None of the above

Question 2Which of the following costs are variable?

Cost10,000 units30,000 units

1200,000600,000

280,000480,000

3180,000180,000

4100,000300,000

A. Costs 1 and 4B. Costs 1 and 2C. Costs 2 and 3D. Costs 3 and 4E. None of the costs are variableThe following information relates to questions 3 to 5A typical 10 night package incurs the following costs:

Transport costs10,000 per tour [inclusive of VAT]

Hotel Accommodation100 per person per night

Food & Beverage40 per person per night

Insurance400 per person per tour

Administration costs3,500 [inclusive of VAT]Question 3The total fixed costs [excluding VAT] are:

A. 13 500.00

B. 11 250.00

C. 16 200.00D. 1 295.00

E. none of the above

Question 4The total variable costs per person per tour [excluding VAT] are:

A. 1 800.00

B. 1 400.00

C. 5 400.00

D. 5 800.00

E. none of the above

Question 5Assuming that a maximum of 50 people can be accommodated on each tour, what is the total cost per person [excluding VAT] per tour?

A. 90 000.00

B. 1 800.00C. 2 025.00

D. 225.00E. none of the above

Question 6A business has a total cost per person of 125 and aims to make a net profit of 10%. What would the minimum selling price [including VAT] need to be in order to achieve this?

A. 138.89B. 120.25C. 137.50D. 125.00E. none of the above

The information below relates to questions 7 to 9Selling Price240 [including VAT]

Variable cost per person120 [excluding VAT]

Total fixed costs3,600 [excluding VAT]

Maximum capacity60 units

Question 7Assuming that the business sells all 60 units, the financial result will be?

A. 1,068 profitB. 3,600 profitC. 1,200 profit

D. 1,200 lossE. none of the above

Question 8If the business discounted its selling price to 180 [including VAT] which of the

following statements is CORRECT?

A. There would be a positive contribution per person of 60B. There would be a positive contribution per person of 30

C. There would be a negative contribution D. There would be a profit of 30

E. None of these statements is correctQuestion 9The minimum price which the company could accept would be:A. 3,600B. 120C. 144

D. 3,720E. none of the aboveQuestion 10A business sells programmes for 3.00 each [including VAT]. Each programme has a variable cost of 75 pence and fixed costs are 25,000 per year. How many programmes does the business need to sell each year in order to breakeven?A. Less than 10,000B. Between 10,000 and 12,000C. Between 12,000 and 14,000D. Between 14,000 and 16,000

E. More than 16,000

Section B Ratio Analysis

Question 1Which of these statements can best be considered as correct?A. Return on Capital shows the amount invested in a businessB. Capital less current liabilities represents return on capital employedC. Return on capital shows the financial return of a businessD. Return on capital represents total assets less current liabilities

E. None of the above Question 2Which ONE of the following statements is INCORRECT?

A. Working capital can be improved by reducing debtor daysB. Working capital can be improved by increasing creditor daysC. A reduction in stock days improves working capitalD. Working capital appears on the balance sheet of a businessE. All of the above statements are incorrectQuestion 3The ratio that calculates the time taken by a business to collect money from customers is known as:

Acreditor days ratio

Bcurrent ratio

Cdebtor days ratio

Dstock days ratio

Enone of the aboveQuestion 4The current ratios of five businesses are shown below. Which business has the most money tied up in liquid resources?

Business 11.1:1

Business 21.6:1

Business 31.2:1

Business 42.9:1

Business 52.5:1

ABusiness 1BBusiness 4CBusiness 2DBusiness 5EBusiness 3

The following information is relevant to questions 5 to 8Summarised Balance Sheets as at 31st March

20122011

Fixed assets99,48546,650

Current assets

Stock40,14550,455

Debtors40,21043,370

Bank12,0925,790

92,44799,615

Less Current Liabilities

Trade creditors36,86242,475

Bank overdraft00

36,86242,475

Net Assets155,070103,790

Financed By :

Capital as at 1st April159,980155,070

Add Net Profit44,87047,680

204,880202,750

Less Drawings40,00060,000

Capital as at 31st March164,850142,750

Long Term Liabilities

Bank Loans9,78038,960

155,070103790

20122011

Turnover500,350597,500

Less Cost of sales160,840252,275

Gross Profit339,510339,225

Less Overhead Expenses294,640291,545

Net Profit for the year44,87047,680

Additional information :

Credit purchases195,624178,704

Credit sales193,008260,220

Summarised Profit and Loss Accounts for the year ending 31st March

Question 5The figure for working capital as at 31st March 2012 is:

A155 070

B55 585

C103 790

D57 140

Enone of the above

Question 6Which of the following statements is CORRECT?

ABetween 2011 and 2012 the acid test ratio has decreased

BBetween 2011 and 2012 the acid test ratio has increased

CBetween 2011 and 2012 the acid test ratio has stayed the same

DIn 2012 the acid test ratio is below the benchmark of 1:1

Enone of the above statements is correctQuestion 7Which of the following statements is CORRECT?

ABetween 2011 and 2012 the stock days ratio has decreased

BBetween 2011 and 2012 the stock days ratio has increased

CBetween 2011 and 2012 and the stock days ratio has stayed the same

DThe stock days ratio should always be more than 50 days

Enone of the above statements is correctQuestion 8Which of the following statements is CORRECT?

Athe debtor days ratio has increased between 2011 and 2012 but the creditor days ratio has decreased

Bthe creditor days ratio has increased between 2011 and 2012 but the debtor days ratio has decreased

Cthe debtor days ratio has increased between 2011 and 2012 and the creditor days ratio has also increased

Dthe debtor days ratio has decreased between 2011 and 2012 and the creditor days ratio has also decreased

Eboth the debtor days ratio and creditor days ratio have stayed the same

The following information relates to questions 9 and 10LimaTango

Net Profit %20%22%

Gross Profit %64%60%

Sales150,000150,000

Lima and Tango are similar operations Question 9Which of the following statements is CORRECT?

ATango is managed with lower overheads than LimaBLima is managed with lower overheads than TangoCthere is no difference between Lima and Tango

Dit doesnt matter about overheads because Lima has a better gross profit percentage

Enone of these statements is correct

Question 10Which of the following statements is INCORRECT?

ALimas Net Profit % is 9.1% lower than Tangos but the Gross Profit % is 6.7% higher

Bthe sales figure is used to calculate both gross and net profits

CLimas Net Profit % is 2% lower than Tangos but the Gross Profit % is 4% higher

DLimas gross profit percentage is 6.7% higher than Tangos gross profit percentage

Enone of these statements is incorrect

Section C- Budgetary Control

The following information relates to questions 1 to 4The following data has been extracted from the operating budgets of the Severn Organisation for 2013.

SalesPurchasesOverheadsDepreciation

May10,2503,6001,940750

June9,2503,1001,900700

July9,6502,9001,850720

Sales60% cash40% one months credit

Purchases80% cash20% two months credit

Overheads100% cash

Notes:

Expenditure on new equipment will be 2,000 in June and 3,800 in JulyQuestion 1The amount of money received from cash sales in May is:

A. 6,150

B. 10,250C. 4,100D. 8,200E. None of the above

Question 2

The amount of money received in June from credit sales is:

A 3,700B 5,550 C 9,250 D 4,100

E None of the above

Question 3The amount of money paid in July for credit purchases is:

A. 720

B. 620C. 520D. 580E. None of the above

Question 4The total payments figure for July is:

A. 9,270B. 8,570C. 4,890

D. 8,690

E. None of the above

The following information relates to questions 5 to 7

The following data has been extracted from the operating budgets of the Thames Organisation for 2013. SalesPurchasesWagesOverheadsDepreciation

January254,000170,00034,00022,0008,000

February203,000136,00028,00018,7008,000

March323,000216,00036,40024,2008,000

April264,000177,00033,40023,6008,000

Notes:

Sales60% cash40% two months credit

Purchases10% cash90% one months credit

Overheads50% cash50% one months credit

Wages are paid as incurred

Stock as at 1st February33,000

Stock as at 30th April29,000

New fixed assets costing 38,000 will be purchased in January and paid for in the following month.

Question 5In the profit & loss account, for the 3 months ending 30th April, the figure for sales would be:

A. 780,000B. 1,044,000C. 790,000

D. 474,000E. none of the above

Question 6In the profit and loss account, for the 3 months ending 30th April, the figure for Cost of Sales would be:

A. 591,000B. 699,000C. 703,000D. 533,000

E. none of the above

Question 7In the profit and loss account, for the 3 months ending 30th April, the total expenses figure would be:A. 226,300B. 188,300

C. 164,300D. 90,500E. none of the above

Question 8Cash Budgets are widely used in service based industries. Decide whether each of the following statements is true or false.1.A Cash Budget is a summary of the expected receipts of cash and payments of cash over a specified period of time.

2.Cash budgets are useful for accounting for the depreciation of fixed assets.

A. Statement 1 is true and Statement 2 is falseB. Statement 1 is false and Statement 2 is true

C. Both Statements are true

D. Both Statements are false

Question 9Which ONE of the following statements is INCORRECT?

A Budgeting reflects the impact of strategic and project plansB Budgeting assists managers in the planning of allocating resourcesC Budgeting sets future business targets and enables managers to compare actual performance and to take appropriate actionD Budgeting enables managers to plan their bonus targets for the following year

E All of the above statements are incorrectQuestion 10If the opening bank balance for a company was 500 for August 2013, the total receipts were 5,500, depreciation was 150 and the total payments were 8,500, what would the closing bank balance be August 2013?

A. (3,400)B. (2,500)C. (2,650)D. 2,500

E. None of the above

Section D- Event Cost CategorisationQuestion1

Any commentary about numbers does NOT need one of the following?

a)Communication

b)Information

c)Data

d)Payment terms

e)None of these

Question 2

Who would be most likely to approve an event budget for a corporate event?

a)The Event Manager

b)The Client

c)The Bank Manager

d)The Event Sponsors

e)None of these

Question 3What is NOT a role of the event budget?

a)Act to forecast an events financial future

b)Assists in programme development

c)Can be described as a quantified statement of plans

d)Identify expenditure and incomes sources

e)None of these

Question 4

What is NOT a reason for sponsoring an event?

a)Promotion of brand

b)Donating

c)Corporate Social Responsibility

d)Brand alignment

e)None of these

Question5

What is a fixed cost at an event?

a)Food and drink costs

b)Accommodation costs

c)Delegate pack costs

d)Room hire costs

e)None of these

Question 6

What is NOT an example of a conference expense?

a)Speakers

b)Legal fees & insurance

c)Registration booths

d)Translation services

e)None of these

Question7

Mismanagement of event finance can lead to which of the following?

a)Safety concerns

b)Crowd control

c)Legal problems

d)Operational risks

e)All of these

Question8

Who would NOT normally see the financial statements of an events organisation?

a)The Client/Investor

b)The creditors

c)Major sponsor

d)Finance Manager

e)None of these

Question 9Financial Statements are reports on the financial performance of organisations. They provide data on:

a)Projections for the upcoming financial year

b)Where money comes from, what money is spent on and how much money is available for use

c)Comparative company data to companies in similar industries

d)All of the above

e)None of the above

Question 10The primary function of the Income Statement is to:

a) Show the company's value as of a given point in time

b)Determine if the company will have enough cash to operate properly

c)Determine taxes owed or not owed

d)Compare the company's assets against the company's liabilities

e)Measure the company's financial performance over a period of time

Level 5 - Formulae Required for Ratio Analysis Questions

1.Return on Capital Employed (ROCE)=Net Profit x 100

Capital at start of the period

2.Asset Turnover=Turnover

Capital at start of period

3.Gross Profit Margin=Gross Profit x 100

Turnover

4.Net Profit Margin=Net Profit x 100

Turnover

5.Fixed Asset Turnover=Turnover

Fixed Assets

6.Stock Days=Stock x 365

Cost of Sales

7.Debtor Days=Debtors x 365

Credit Sales

8.Creditor Days=Creditors x 365

Credit Purchases

9.Current Ratio=Current Assets

Current Liabilities

10.Quick Ratio

(Acid Test)= Current Assets Stock

Current Liabilities