Chapter 2 Forecasting and Budgeting Key Terms

Break-even point

• The profit amount that reflects only those line items over which a manager has any influence or control.

• The minimum amount of sales an establishment must generate to cover all costs.

• Profit resulting from specific investments made in an operation.

• A markup method based on expenses being increased by a predetermined amount, normally a percentage of the previous year’s expense.

Budget

• A budget that is based on several possible levels of sales activity, also known as a variable budget.

• A budget that allows an establishment to plan for the replacement of high-cost equipment that wears out, and to purchase new types of equipment that may come on the market.

• A budget from one year to five years in the future.

• A plan that indicates an operation’s financial objectives or financial standards.

Budgeting process

• The process of using historical information and knowledge of external factors to predict future sales.

• A method that involves estimating expenses for a future period as a percentage of the sales forecast.

• The way managers go about developing a budget, which is a process of both planning and control.

• Making future predictions about the budget based on current situations and trends.

Capital expenditure budget

• A budget that allows an establishment to plan for the replacement of high-cost equipment that wears out, and to purchase new types of equipment that may come on the market.

• A budget that is based on several possible levels of sales activity, also known as a variable budget.

• A budget from one year to five years in the future.

• A formal one-year operating plan to achieve the financial goals of an organization.

Controllable profit

• The difference between actual results (i.e., sales) and targeted or budgeted results.

• The profit amount that reflects only those line items over which a manager has any influence or control.

• A budget that is based on a certain level of sales revenue; expense estimates for food, labor, and other costs are then calculated based on that level of sales.

• Profit resulting from specific investments made in an operation.

Cost of sales

• Decrease in the weight of purchased meat because of cooking or trimming.

• The minimum amount of sales an establishment must generate to cover all costs.

• The cost of the food and beverage products to a given operation.

• The percentage of an amount of a food item served to a guest.

Fixed budget

• A budget from one year to five years in the future.

• A budget that is based on a certain level of sales revenue; expense estimates for food, labor, and other costs are then calculated based on that level of sales.

• A budget planned for a week, a month, or a quarter.

• A budget that is based on several possible levels of sales activity, also known as a variable budget.

Flexible budget

• A budget that is based on several possible levels of sales activity, also known as a variable budget.

• A formal one-year operating plan to achieve the financial goals of an organization.

• The process of using historical information and knowledge of external factors to predict future sales.

• Making future predictions about the budget based on current situations and trends.

Forecasting

• A formal one-year operating plan to achieve the financial goals of an organization.

• Making future predictions about the budget based on current situations and trends.

• A method that involves estimating expenses for a future period as a percentage of the sales forecast.

• The process of using historical information and knowledge of external factors to predict future sales.

Income statement

• The profit amount that reflects only those line items over which a manager has any influence or control.

• A document that reports an operation’s sales, expenses, and profits or losses for a period of time, such as a month, a quarter, or a year.

• A budget that is based on a certain level of sales revenue; expense estimates for food, labor, and other costs are then calculated based on that level of sales.

• A budget planned for a week, a month, or a quarter.