Question

On an income statement prepared according to the recommended USAR format, the cost of utilities is listed further down the statement than the cost of labor because...

	A.	the cost of utilities is usually less than the cost of labor.
	B.	the cost of utilities is usually greater than the cost of labor.
	C.	managers have less control over the cost of utilities than the cost of labor.
	D.	managers have more control over the cost of utilities than the cost of labor.

2. A chef invests $40,000 of their own money, and $160,000 borrowed from a bank, to open their new restaurant. What percentage of this cehf's new operation was equity funded?

	A.	20%
	B.	25%
	C.	80%
	D.	40%

Answer 1

Q#1)

Answer :(C) managers have less control over the cost of utilities than the cost of labor

Explanation :

According to USAR, income statement can be divided into 3 sections.Items of income statement are arranged on the basis of Controllability by the food-service manager. Items which are most controllable are listed on top and the items least controllable are listed down on the income statement.

Labor costs come in operating expenses section, on which manger can exercise better control on a daily, weekly or monthly basis. Cost of utilities come in non-operating expenses section which is least controllable by the food-service mangr. Therefore the cost of utilities is listed further down the income statement than the cost of labor.

Q#2).

Answer : (A) 20%

Percentage of equity fund:

= (Total fund - Borrowed fund) / Total fund

=(200000-160000)/200000

=40000/200000

=20%

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