Refer to Scenario 9

question 245

Multiple Choice

Refer to Scenario 9.3 below to answer the question(s) that follow.
SCENARIO 9.3: Investors put up $520,000 to construct a building and purchase all equipment for a new restaurant. The investors expect to earn a minimum return of 10 per cent on their investment. The restaurant is open 52 weeks per year and serves 900 meals per week. The fixed costs are spread over the 52 weeks (i.e. prorated weekly) . Included in the fixed costs is the 10% return to the investors and $1,000 per week in other fixed costs. Variable costs include $1,000 in weekly wages and $600 per week for materials, electricity, etc. The restaurant charges $5 on average per meal.
-Refer to Scenario 9.3. The normal return to the investors on a weekly basis is

Definitions:

Internal Audit Staff

Employees of an organization who perform independent and objective evaluations of the effectiveness and compliance of the firm's operations, including the reliability of financial reporting.

Consignment

An arrangement where goods are left in the possession of another party to sell, but ownership and title remain with the supplier until the goods are sold.

Revenue Recognition

The accounting principle governing when revenue is considered earned and can be recorded in the financial statements.

Risk Of Ownership

The potential for loss resulting from owning an asset, including factors such as depreciation, obsolescence, and market volatility.