“I think I can buy it at a great price,” said Dan Flood. He was talking about the Watershed Restaurant. The property was for sale and Dan was meeting with Loralei Glenn, his friend and an experienced restaurant manager. “It’s losing about 7 cents on each dollar sale now,” continued Dan, “but I know we can turn that around.” Loralei considered Dan’s proposal that they form a partnership, acquire the restaurant, and share in the profits they planned to make. She knew that, before it was possible to share profits, they would actually have to make a profit. That meant, to go from losing 7 cents per dollar to making money, they would have to increase sales, reduce costs, or both. She mentioned that to Dan. “Well,” he replied, “I’m not sure we need to increase the sales at all. If we buy at the right price, I think we just need to reduce our costs. You can do it that.” Assume that the restaurant’s sales volume last year was approximately $1,400,000, and thus its loss for the year was about $98,000. 1. If Dan and Loralei decide to buy the restaurant, some fixed costs would be incurred. List at least five important fixed costs that would be directly affected by the purchase decisions Dan would make regarding the acquisition of the property. 2. If Dan and Loralei operate the restaurant, some variable costs would be incurred. List at least five important variable costs that would be directly affected by the operating decisions Loralei will make as she manages the restaurant. 3. Consider the decisions Dan and Loralei will make if they choose to acquire the restaurant. While clearly both are important, whose decisions do you think are the most important to ensuring the future profitability of the Watershed? Why do you think so?
> Step 1(a). – As a group, identify a ‘high visibility’ operation that you all are familiar with. This could be a type of quick service restaurant, record stores, public transport systems, libraries, etc. Step 2(b). – Once you have identified the broad cla
> A transport services company provides a whole range of services to railway operators. Its reputation for quality was a valuable asset in its increasingly competitive market. ‘We are continually looking for innovation in the way we deliver our services be
> For over 10 years a hotel group, had been developing self-managed improvement groups within its hotels. At one hotel reception desk, staff became concerned about the amount of time the reception desk was left unattended. To investigate this, the staff be
> Develop cause–effect diagrams for the following types of problem: (a). Staff waiting too long for their calls to be answered at their IT helpdesk. (b). Poor food in the company restaurant. (c). Poor lecturing from teaching staff at a university. (d). Cus
> McPherson Charles, based in Bristol in the West of England, has grown rapidly to be one of the biggest law firms in the region. Comprising 21 partners and a total of 400 staff it is an ambitious partnership aiming to maintain its impressive growth record
> Everything we do can be broken down into a process’ said Lucile, COO of an outsourcing business for the ‘back office’ functions of a range of companies. ‘It maybe more straightforward in a manufacturing business, but the concept of process improvement is
> Go back to Chapter 10 and re-read the description of the Theory of Constraints (ToC). Now consider the similarities and differences between ToC and lean synchronisation in terms of their overall objectives, measures of effectiveness, improvement method a
> • Examine the value-added versus non-value-added times for some other services. For example: (a). Handing-in an assignment in for marking if you are currently studying for a qualification. (What is the typical elapsed time between handing the assignment
> An insurance underwriting process consists of the following separate stages. What is the ‘value-added’ percentage for the process? (Hint – use Little’s law to work out how long ap
> Consider this record of an ordinary flight. ‘Breakfast was a little rushed but left the house at 6.15. Had to return a few minutes later, forgot my passport. Managed to find it and leave (again) by 6.30. Arrived at the airport 7.00, dropped Angela off wi
> Re-examine the description of the Toyota production system at the beginning of the chapter. (a). List all the different techniques and practices that Toyota adopts. Which of these would you call just-intime philosophies and which are just-in-time techniq
> Think through the following three brief examples. What type of control (according to Figure 10.13) do you think they warrant? 1. The Games Delivery Authority (GDA) was a public body responsible for developing and building the new venues and infrastructu
> Read the following descriptions of two cinemas. Kinepolis in Brussels is one the largest cinema complexes in the world, with 28 screens, a total of 8,000 seats, and four showings of each film every day. It is equipped with the latest projection technolo
> It takes six hours for a contract laundry to wash, dry and press (in that order) a batch of overalls. It takes three hours to wash the batch, two hours to dry it and one hour to press it. Usually each day’s batch is collected and ready for processing at
> Revisit the example on the Blood and Transplant service at the beginning of the chapter. (a). What are the factors that constitute inventory holding costs, order costs and stock-out costs in a National Blood Service? (b). What makes this particular inven
> Aarens Electronic (AE) produces ‘precision custom coating and laminating services to a wide range of customers, amongst the most important being, Phanchem to whom it supplied dry photoresist imaging films, a critical step in the manufacturing of microchi
> Our suppliers often offer better prices if we are willing to buy in larger quantities. This creates a pressure on us to hold higher levels of stock. Therefore, to find the best quantity to order we must compare the advantages of lower prices for purchase
> A fruit canning plant has a single line for three different fruit types. Demand for each type of tin is reasonably constant at 50,000 per month (a month has 160 production hours). The tinning process rate is 1,200 per hour, but it takes two hours to clea
> A supplier makes monthly shipments to ‘House & Garden Stores’, in average lot sizes of 200 coffee tables. The average demand for these items is 50 tables per week, and the lead time from the supplier three weeks. ‘House & Garden Stores’ must pay for inve
> Revisit the example, ‘United drags passengers off its plane’. (a). How should the airline have handled the situation? (b). After the incident attracted so much negative publicity, United announced a new upper limit of $10,000 in compensation for passen
> Seasonal demand is particularly important to the greetings card industry. Mother’s Day, Father’s Day, Halloween, Valentine’s Day and other occasions have all been promoted as times to send (and buy) appropriately designed cards. Now, some card manufactur
> A German car manufacturer defines ‘utilisation’ as the ratio of actual output for a process to its design capacity, where design capacity is the capacity of a process as it is designed to operate. However, it knows tha
> In a typical 7-day period, the planning department of the pizza company programs its ‘Pizzamatic’ machine for 148 hours. It knows that changeovers and set-ups take 8 hours and breakdowns average 4 hours each week. Waiting for ingredients to be delivered
> A Pizza Company has a demand forecast for the next 12 months that is shown in Table 8.5. The current workforce of 100 staff can produce 1,500 cases of pizzas per month. Table 8.5: Month ………………………………………………………………. Demand (cases per month) January …………………
> Many companies devise a policy on ethical sourcing covering such things as workplace standards and business practices, health and safety conditions, human rights, legal systems, child labour, disciplinary practices, wages and benefits, etc. (a). What do
> If you were the owner of a small local retail shop, what criteria would you use to select suppliers for the goods that you wish to stock in your shop? Visit three shops that are local to you and ask the owners how they select their suppliers. In what way
> A chain of women’s apparel retailers had all their products made by Lopez Industries, a small but high-quality garment manufacturer. They worked on the basis of two seasons; Spring/Summer season and Autumn/Winter. ‘Sometimes we are left with surplus item
> The COO of Super Cycles was considering her sourcing strategy. ʻI have two key questions, for each of our outsourced parts, what is the risk in the supply market, and what is the criticality of the product or service to our business? As far
> A gourmet burger shop has a daily demand for 250 burgers and operates for 10 hours. (a). What is the required cycle time in minutes? (b). Assuming that each burger has 7.2 minutes of work required, how many servers are required? (c). If the burger sho
> At the theatre, the interval during a performance of ‘King Lear’ lasts for 20 minutes and in that time 86 people need to use the toilet cubicles. On average, a person spends 3 minutes in the cubicle. There are 10 cubicles available. (a). Does the theatr
> A company has decided to manufacture a general-purpose ‘smoothing plane’, a tool which smooths and shapes wood. Its engineers estimated the time it would take to perform each element in the assembly process. The market
> The headquarters of a major creative agency offered a service to all its global subsidiaries that included the preparation of a budget estimate that was submitted to potential clients when making a ‘pitch’ for new work
> It is a real problem for us’, said Angnyeta Larson, ʻWe now have only ten working days between all the expense claims coming from the departmental coordinators and authorizing payments on the next month’s payroll. This really is not long enough and we ar
> One of the examples at the beginning of the chapter described ‘drive-through’ fast-food processes. Think about (or better still, visit) a drive-through service and try mapping what you can see of the process (plus what you can infer from what may be happ
> Revisit the example at the beginning of this chapter that examines some of the principles behind supermarket layout. Then visit a supermarket and observe peoples’ behaviour. You may wish to try and observe which areas they move slowly past and which area
> A direct marketing company sells kitchen equipment through a network of local representatives working from home. Typically individual orders, usually contain 20 to 50 individual items. Much of the packing process was standardised and automatic. The Vice
> McDonald’s is the best-known fast-food brand in the world (32,000 plus restaurants) and, since its foundation in the 1950s, is held to have totally changed the food industry. Innovatively, it was a self-service drive-in format with a very limited menu (b
> The international Frozen Pizza Company (IFPC) operates in three markets globally. Market 1 is its largest market where it sells 25,000 tons of pizza per year. In this market, it trades under the name ‘Aunt Bridget’s Pizza’ and positions itself as making
> A company produces a wide range of specialist educational kits for 5–10 year olds is based in an industrial unit arranged in a simple layout of with six departments, each performing a separate task. The layout is shown in Figure 5.9 tog
> Visit a branch of a retail bank and consider the following questions: (a). What categories of service does the bank seem to offer? (b). To what extent does the bank design separate processes for each of its types of service? (c). What are the different p
> Globalisation is very much a “mixed blessing”. There is little doubt that it has lifted millions out of poverty, but it has also led to the destruction of traditional cultures in developing countries and many jobs in the developed world.’ Draw up lists o
> The United Photonics Groups is a US-based corporation that manufactures lenses and precision instruments. It has a reputation for technical excellence and its products are reputed to be amongst the most technically advanced in the global market. Recently
> Slagelse Industrial Services (SIS) had become one of the Europe’s most respected die caster of zinc, aluminium and magnesium parts supplier for hundreds of companies in many industries, especially automotive and defence. The case describes the formulatio
> This case is essentially a story of how a relatively small factory, supplying ink jet paper to Hewlett-Packard and other customers moved itself from being a loss-making operation into a profitable position by gaining control of its processes. The case co
> Ferndale Sands Conference Centre is a conference venue of 52 rooms in Victoria State, Australia outside Melbourne. Established initially as a hotel, it was re-launched as a conference centre four years ago. The centre had managed to establish a presence
> The case relates the history of some improvement initiatives carried out at a (fictional) hospital in Sweden from the perspective of Denize Ahlgren the new Chief of Administration (COA) at St Bridget’s. Dr Pär Solberg, a clinician who also heads the hosp
> C.K. One’ founded subText in South East Asian computer generated imaging (CGI) market, three years ago. The case opens with him (the first time) needing to apologise to some clients, because of the failure of the businesses resource planning and control
> Concept Design Services (CDS) is a company that has changed from being a manufacturer, initially of precision plastic components and cheap ‘homeware’ to making very high quality homewares, then to offering a â
> “You’ve got to be kidding me!” said Amit Chopra, owner of the 215‐room Comfort Express in Jamestown. “No, I’m not kidding. He sold them all,” replied Sylvia Zepeda, the hotel’s director of sales and marketing. Together, Amit and Sylvia served as the hote
> “I think we have to do it,” said Paula, the director of operations for the five‐unit Hungry Henry’s pizza chain. Paul was talking to Henry Acosta, the chain’s founder. Paula and Henry were discussing the fact that their competitors in the area had extend
> Mary Margaret Glenn knew the going would be tough for the first couple of years. She was now finding out exactly how tough. After five years of working for others, Mary and her former college roommate had pooled their resources and purchased a small buil
> Bill O’Leary could see both sides of the issue. As the general manager of the 500‐unit Plazamar Hotel, he knew how important it was to remember that both members of his room revenue management team now sitting across his desk shared the same goals. What
> “I still don’t get it,” said Ahmir, “how can all the monthly loan repayments we make to the bank for the dining room expansion project we completed last year not be considered an operating expense? We make the payments out of the money we get from being
> Charlotte Lebioda grew up in the hotel business. Her parents owned and operated a 100‐ room limited service hotel for 20 years. When Charlotte graduated from hospitality school, her parents retired, turning the business over to Charlotte. Her hotel has a
> “I don’t get it,” said Tasha “are you telling me that we sold over ten thousand dollars’ worth of gift cards for the holidays but we didn’t make any sales?” Tasha was the assistant manager at the Logjam Restaurant, a casual operation featuring grilled st
> Lezinah Ncube has just taken a new job as regional manager of a limited service hotel chain. Her region includes six hotels, with each hotel consisting of approximately 150 rooms each. Each hotel also offers a small amount of meeting space and provides i
> “Are you sure you read it right?” asked Ahmed, the restaurant manager at the Golden Rose restaurant. Ahmed was talking to Bart, the restaurant’s bar manager. “I read it right, and it’s great news!” replied Bart. Ahmed and Bart were discussing the restaur
> David Berger was about to achieve his dream. Having finished culinary school and then completed his hospitality management degree, David was ready to seek the financial backing he needed to open what he firmly believed would be his first and a very succe
> Rodney Nicole was excited as he talked to his friend Ali Pennycuff. “I bought the truck!” said Rodney. “You bought the food truck you were looking at?” asked Ali. “I sure did. It will only take me a week or so to do the interior modifications I need and
> Samara Tate couldn’t have been happier. As she looked back on the past two years, she realized just how much how her hard work had paid off. First, she had been hired as a waitress at the exclusive Sycamore Country Club working in the “Member’s Only” din
> “This is a bit new for me,” said Maddie, the new controller at the 600‐room Fairmont Hotel. “I know,” said Marcus, the hotel’s general manager, “but you will catch on pretty quick I’m sure. And I am convinced you’ll do great job for us.” Maddie had just
> “I don’t know, Bharath,” said Arun Poddar, Bharath’s close friend and business partner. “It looks risky to me.” Bharath Chaturvedi had just proposed that Arun go into business with him by purchasing the Carlton Hotel. The 400‐room property was for sale a
> “Let me make sure I understand this. You want to set the rates for the third week in October at full rack, close out all discounts, and immediately block any inventory we are not contractually obligated to provide our discount intermediaries,” said Amand
> “I think it’s a great idea,” said Natalie Duke, the director of sales and marketing at the Rosewood Plaza Hotel. Natalie was telling Renée Watson, the hotel’s general manager, about her request to install an electronic programmable sign that would be in
> 1. Which is a factor used in the food cost %, contribution margin, and goal value analysis methods of menu analysis? A. Popularity B. Food cost % C. Contribution margin D. Variable costs 2. When using the food cost percentage matrix method of menu anal
> 1. Which is the formula that food service managers use to calculate their total revenue? A. Price x Number Sold = Total Revenue B. Price / Number Sold = Total Revenue C. Number of customers x Price = Total Revenue D. Number of customers / Price = Total
> 1. As the level of personal service in a hospitality business increases, operating costs A. increase and selling prices must also be increased. B. increase and selling prices must be decreased. C. decrease and selling prices must also be decreased. D. d
> 1. Last year a 500-room hotel was open for 365 days, had rooms department costs of $2,409,000, and achieved a 75% occupancy. What was the hotel’s CPOR for rooms department costs? A. $17.60 B. $176 C. $1,760 D. $1.76 2. In February, a restaurant had a b
> 1. Which of the following is calculated as: Current Assets – Current Liabilities? A. Working capital B. Cash flow C. Fresh cash flow D. Liquidity 2. Which is NOT a solvency-related ratio? A. Operating cash flows to current liabilities ratio B. Debt to
> 1. Which is NOT a proper way to express the ratio of “10 out of each 100?” A. 10 B. 0.10 C. 10% D. 10/100 2. Which is the formula used to calculate a ratio? A. Part / Whole= Ratio B. Whole / Part =Ratio C. Part x Whole =Ratio D. Whole x Part =Ratio 3.
> 1. Which action on the part of a manager would affect a business’s cash flow from investing activities? A. Selling marketable securities B. Increasing the size of food inventories C. Collecting $25,000 from accounts receivable D. Borrowing $50,000 to exp
> 1. Which change recorded in the liabilities and owners’ equity portion of a balance sheet represents a source of funds? A. Increase in accounts payable B. Decrease in long-term debt C. Decrease in paid in capital D. Decrease in notes payable 2. Which c
> 1. The Statement of Cash Flows (SCF) shows all sources and uses of a business’s funds resulting from operating, A. investing, and financing activities B. investing, and equity funding activities C. equity funding, and debt financing activities D. equity
> Jessica Castillo had always been interested in food and cooking. After culinary school and several extensive apprentice stints with some of the best chefs in New York and a spectacular year in London, Jessica felt that she was ready to open her own resta
> 1. Which of the following current assets is the LEAST liquid? A. Inventories B. Cash C. Accounts receivable D. Net receivables 2. A hotel prepares it balance sheet in USALI recommended format. Which current liability would be listed FIRST on this hotel’
> 1. Which balance sheet format are managers using when they list a business’s assets on the left side of the balance sheet report, with liabilities and owners’ equity listed on the right side of the report? A. Account format B. Debit format C. Credit form
> 1. Business owners prepare balance sheets to better understand the value of a business and A. how well its assets have been utilized to produce wealth B. the revenue producing ability of the business C. the profit making ability of the business D. how q
> 1. To increase a restaurant’s revenue, its managers must increase the number of guests served or A. increase the amount spent by each guests B. increase the prices charged to guests C. reduce the operation’s controllable operating expense D. reduce the
> 1. What are the two expenses, listed on the income statement, that make up a restaurant’s prime costs? A. Cost of sales and cost of labor B. Cost of sales and occupancy costs C. Occupancy costs and cost of labor D. Marketing costs and cost of sales 2.
> 1. In a hospitality business, a cost center is best defined as a A. unit or department that generates costs, but no revenues or profits B. department in charge of product purchases C. unit responsible for all of the revenues generated by the business D.
> 1. Which is the foundation of accurate financial reporting and analysis? A. Bookkeeping B. Managerial accounting C. Summary accounting D. Cost analysis 2. In the hospitality industry, a property management system (PMS) is used to record A. customer tra
> 1. Which is the primary concern of financial accounting? A. Recording financial transactions B. Identification of tax payments C. Control of costs D. Financial management decision making 2. Which governmental entity establishes standards, and then awar
> 1. The primary purpose of accounting is to report on an organization’s A. money and valuable property. B. revenue potential. C. proper staffing levels. D. estimated market value. 2. The best definition of an accountant is a person who A. is skilled in
> 1. The USALI is a series of standardized accounting procedures used by A. hotel managers B. club managers C. bar managers D. restaurant managers 2. The USAR is a series of standardized accounting procedures used by A. restaurant managers B. club manage
> “We have to lower our prices or we’ll just get killed,” said Hoyt Lamont, director of operations for the 10‐unit Blinky’s sub shops. Blinky’s was known for its modestly priced, but very high‐ quality, sandwiches and soups. Business and profits were good,
> 1. Which GAAP prevents a business from switching back and forth between an accrual and a cash accounting system in the same accounting period? A. Consistency Principle B. Conservatism Principle C. Matching Principle D. Objectivity Principle 2. Which GAA
> 1. Which is the accounting summary that presents the financial condition, or financial health, of a business? A. Balance Sheet B. Income Statement C. Profit and Loss Statement D. Statement of Cash Flows 2. Which is the accounting statement that reports
> 1. A hospitality business owner pays $50,000 per year in interest on loans to her business. The annual net operating income from her business is $220,000. What is this owner’s debt coverage ratio? A.4.4 times B.4.0 times C.2.4 times D.2.0 times 2. An i
> 1. The two factors that most affect the returns achieved on an investment are A. rate of investment return and length of investment. B. rate of investment return and amount of investment. C. amount of investment and length of investment. D. investment ri
> 1. A capital budget is the tool hospitality managers use to plan and evaluate A. the purchase of fixed assets. B. the amount of cash to keep on hand. C. their selling prices. D. their operating expense ratios. 2. Which is the term used only to describe
> 1. An operation’s aging report is used monitor its A. accounts receivable (AR). B. accounts payable (AP). C. credit applications (CA). D. statement of cash flows (SCF). 2. What is the most commonly used method of managing cash shortages in businesses t
> 1. A bar manager estimates her next month’s beverage revenue will be $85,200. The bar manager forecasts her Cost of Sales: Beverages for next month to be 22%. What would be amount of this manager’s forecasted Cost of Sales: Beverages for next month? A.
> 1. The two most common methods of classifying different types of budgets are by their length and A. purpose. B. amount. C. horizon. D. complexity. 2. Which type of budget would provide management with the LEAST amount of detail? A. Long-range budget B
> 1. When a hotel’s room revenue forecasts are consistently and unrealistically too low they A. result in under-aggressive room rate determinations and rates that are set too low. B. cause unrealistic high profit expectations by the hotel’s owners C. produ
> 1. Which operation would be most likely to experience a seasonal sales trend? A. Ski resort B. Downtown business hotel C. Suburban business hotel D. Select-service highway hotel 2. Which is the foundation of an accurate hotel sales forecast? A. Sales hi
> Andrea Wasserman knows her business, but she often wonders if anyone else really does. Andrea owns and operates a successful catering company. Each catered event she manages is unique. Her company enjoys an excellent reputation because of Andrea’s attent
> 1. If a hospitality operation’s sales are too low, total revenue A. may be insufficient to cover fixed and variable costs. B. will cover fixed, but not variable costs. C. will cover variable, but not fixed costs. D. may create profits, but may still not
> 1. Which is the opposite of incurring an expense? A. Incurring an opportunity cost B. Incurring a fixed cost C. Incurring a mixed cost D. Incurring a step cost 2. When they are calculated as a percentage of sales, a hospitality operation’s costs are A.
> 1. A restaurant pays its website developer a monthly fee for hosting and maintaining its web presence. The monthly fee charged by the developer is $400, plus $0.003 per site click. What would be the restaurant’s total cost for last month if 24,000 intern
> 1. At any specified level of revenue, A. the lower a business’s costs, the greater are its profits. B. the lower a business’s costs, the lower are its profits. C. the greater a business’s costs, the greater are its profits. D. a business’s costs will ha
