Question

1. The formula for the Multiple in setting prices for food and beverage products is based on food sales. T/F

2. Net book value is an example of a ________ cost.
a. discretionary cost

b. sunk cost

c. mixed cost

d. step cost

3. Forecasting methods are first categorized according to "formal" and "informal" methods. T or F

Answer 1

1. True

The formula for multiple in setting prices for food and beverage products is based on food sales.

The food sales determine how much quantity of food and beverages will be sold. If more are sold, the product can be sold at cheaper prices considering the demand.

Everything is based on demand and supply concept. Hence, price is a multiple of sales.

2. Net book value is and example of mixed cost.

Net book value simply means assets minus external liabilities.

Sunk cost means such cost incurred which cannot be recovered. Net book value is not a sunk cost.

Discretionary costs means such costs which can be avoided. They are wants rather then need. Hence net book value cannot be this.

Step costs are costs which remain constant for specific level.

Mixed cost are combination and depend upon different expense and income. Hence net book value is a type of mixed cost.

3. True

Forecasting method can be classified as formal and informal. These are also known and qualitative and quantitative method.

Informal methods include extrapolation and hence also known as qualitative because it does not depend much on numbers.

Formal methods are known as quantitative methods because they make use of numbers.