CHAPTER 6
THE BOTTOM-UP APPROACH TO PRICING
TRUE OR FALSE QUESTIONS
(Correct answer indicated by T for True and F for False)
to obtain the selling price.
amount of tax.
forecast annual sales revenue by (seats × daily seat turnover × days open in the year).
decrease.
each meal period to forecast the average check by meal period.
multiply the item cost by three to obtain the selling price.
food cost percent.
offered is known as the sales revenue mix.
a lower gross margin, all other things being equal, our net income will be higher.
combined with its contribution margin (gross margin), is known as menu engineering.
same percentage.
staffing schedules.
loss of sales revenue from a restaurant seat not used during a meal period.
20. Hotel room inventory cannot be increased quickly in the short run.
sales revenue from the average room per year is $40,000, average room rate should be
$40.
22. The $1 per $1,000 method of establishing room rates should be used with caution.
23. An average room rate is the rate charged at all times for each room in the hotel.
individual room rates.
equals the number of rooms double occupied.
in newer hotels compared to older ones.
rooms.
scheduling and advertising.
percentage.
rooms occupied overnight were sold at the rack rate without any discount.
inelastic demand.
known as inelastic demand.
MULTIPLE CHOICE QUESTIONS
(Correct answer indicated by asterisk)
1. Which of the following would not call for a tactical pricing decision?
2. If, in a restaurant, food cost, labor cost, and other operating costs total 60%, and indirect
costs including net income are $42,000, then sales revenue required to provide the desired net
income will be:
3. Sales sales revenue in a restaurant open every day for a week is $5,296. The restaurant has 60
seats. Seat turnover is 1.5 per day. Average check is:
4. All other things being equal, an increased seat turnover will:
5. Total annual restaurant sales revenue is $754,000. Lunch turnover is 2.25 and there are 60
seats. Lunch is served 5 days a week and is 30% of total annual sales revenue. Lunch
average check will be:
6. A menu item has a food cost of $5.00 and the selling price is based on a 40% cost. The
selling price of the menu item is:
7. Menu Item 1’s selling price is $3.00 and food cost 20%. Menu Item 2’s selling price is $6.00
and food cost 50%. All other things being equal, it would be better to sell:
8. Menu item sales revenue mix is:
9. A method of menu analysis that concerns itself with each menu item’s popularity combined
with its contribution margin (gross margin) is known as:
10. Average room rate for a motel is $80.00. Occupancy is 60% percent. The motel has 80
rooms. Double occupancy rate is 50%. Spread between single and double rates is $5.00.
Average single rate is:
11. When the selling prices of items sold in two or more departments are set so that prices
complement or are compatible with each other, this is known as:
12. The loss of sales revenue from a guest room on a given day is more serious than loss of sales
revenue from a restaurant customer on a given day because:
13. Forecast annual motel room sales revenue is $642,400. The motel has 40 rooms and an 80%
occupancy rate. What is the average room rate?
14. In menu engineering, there are four names used to identify four classifications of menu items,
15. Total guests during the year are 38,460. Rooms sold during the year are 29,840. The double
occupancy rate is:
16. Analyzing guest-room occupancy by day of the week is useful because it may indicate:
17. The maximum rate established for each room in a hotel is its:
18. A hotel’s potential average room rate is the average rate that would result if: