FSM EXAM 3 EXAMINATION REVIEW PACK
BUNDLED QUESTIONS AND VERIFIED
ANSWERS
●● Incremental/Fixed Budget.
Answer: Last year's budget + % increase; locked for year.
●● Incremental/Variable Budget.
Answer: Last year's budget + % increase; adjusts with volume.
●● Zero-Based/Fixed Budget.
Answer: Built from scratch each year; locked once set.
●● Zero-Based/Variable Budget.
Answer: Built from scratch; adjusts with actual production.
●● Incremental Budget.
Answer: Based on prior year's budget + predetermined increment.
●● Zero-Based Budget.
Answer: Every dollar must be justified — written from scratch.
,●● Fixed Budget.
Answer: Allocates a set amount for the entire fiscal year — predictable
but inflexible.
●● Variable Budget.
Answer: Expenses shift with actual production, volume, or revenue —
more realistic but reactive.
●● Fiscal Year.
Answer: Any 12-month period used for financial planning — does NOT
have to start Jan 1.
●● Calendar Year.
Answer: Jan 1 - Dec 31.
●● Accounting Period.
Answer: The sub-unit used for financial reporting — may be 4-week
periods, calendar months, or quarters.
●● Cost Center.
Answer: A department that has expenses but does not generate revenue.
,●● Revenue Center.
Answer: A department that generates income.
●● Profit Center.
Answer: Income exceeds operating costs.
●● Operating Statement.
Answer: Prepared by accounting at the end of each accounting period;
compares ACTUAL performance to BUDGET.
●● Variance Analysis.
Answer: Identifies and explains deviations from the budget.
●● Profit & Loss Statement (P&L).
Answer: Generated by accounting; lists ALL actual data for the
accounting period.
●● Balance Sheet.
Answer: Snapshot of the organization's financial status at ONE specific
point in time.
●● Depreciation.
, Answer: Spreads cost of capital equipment/buildings over their useful
life.
●● Capital Budgets.
Answer: For costly, durable items; managers write proposals to
REQUEST funds.
●● 5-Step Capital Budget Process.
Answer: 1. Determine capital goods needed 2. Prioritize items 3.
Estimate costs 4. Prepare request with justification and cost data 5.
Submit paperwork on time and in correct form.
●● Revenue Sources.
Answer: Student meal sales (~31%), Federal reimbursement (~50%),
Donated commodities (~7%), Adult meal sales (~6%), Other food sales
(~3%).
●● Expense Categories.
Answer: Labor, Materials, Overhead, Other Operating Expenses.
●● Cost of Sales (COGS).
Answer: Direct cost of food/beverages sold.
●● Gross Profit.
BUNDLED QUESTIONS AND VERIFIED
ANSWERS
●● Incremental/Fixed Budget.
Answer: Last year's budget + % increase; locked for year.
●● Incremental/Variable Budget.
Answer: Last year's budget + % increase; adjusts with volume.
●● Zero-Based/Fixed Budget.
Answer: Built from scratch each year; locked once set.
●● Zero-Based/Variable Budget.
Answer: Built from scratch; adjusts with actual production.
●● Incremental Budget.
Answer: Based on prior year's budget + predetermined increment.
●● Zero-Based Budget.
Answer: Every dollar must be justified — written from scratch.
,●● Fixed Budget.
Answer: Allocates a set amount for the entire fiscal year — predictable
but inflexible.
●● Variable Budget.
Answer: Expenses shift with actual production, volume, or revenue —
more realistic but reactive.
●● Fiscal Year.
Answer: Any 12-month period used for financial planning — does NOT
have to start Jan 1.
●● Calendar Year.
Answer: Jan 1 - Dec 31.
●● Accounting Period.
Answer: The sub-unit used for financial reporting — may be 4-week
periods, calendar months, or quarters.
●● Cost Center.
Answer: A department that has expenses but does not generate revenue.
,●● Revenue Center.
Answer: A department that generates income.
●● Profit Center.
Answer: Income exceeds operating costs.
●● Operating Statement.
Answer: Prepared by accounting at the end of each accounting period;
compares ACTUAL performance to BUDGET.
●● Variance Analysis.
Answer: Identifies and explains deviations from the budget.
●● Profit & Loss Statement (P&L).
Answer: Generated by accounting; lists ALL actual data for the
accounting period.
●● Balance Sheet.
Answer: Snapshot of the organization's financial status at ONE specific
point in time.
●● Depreciation.
, Answer: Spreads cost of capital equipment/buildings over their useful
life.
●● Capital Budgets.
Answer: For costly, durable items; managers write proposals to
REQUEST funds.
●● 5-Step Capital Budget Process.
Answer: 1. Determine capital goods needed 2. Prioritize items 3.
Estimate costs 4. Prepare request with justification and cost data 5.
Submit paperwork on time and in correct form.
●● Revenue Sources.
Answer: Student meal sales (~31%), Federal reimbursement (~50%),
Donated commodities (~7%), Adult meal sales (~6%), Other food sales
(~3%).
●● Expense Categories.
Answer: Labor, Materials, Overhead, Other Operating Expenses.
●● Cost of Sales (COGS).
Answer: Direct cost of food/beverages sold.
●● Gross Profit.
