Adapting Cost Efficiency: Activity-Based Costing in Restaurants and Tactics to Strengthen Business in a Turbulent Market

Abstract

The research work emphasizes the importance and the need for activity-based costing methods and aims to implement the activity-based costing method in the fast-casual restaurant chosen. To gain profit, the need for a sophisticated costing method that can calculate the costs of menu items accurately has to be realized by the management. The activity-based costing method is known for its ability to calculate costs accurately based on the resources used for each activity to produce a product. The overhead costs which cannot be directly traced to the products or services and are known to be difficult to handle are allocated to the products distinctly using the activity-based costing method. In the current dynamic environment, the need to identify the costs involved and their allocation is crucial in running a business. The work presents the techniques of activity-based costing method and describes the way it was implemented in the restaurant. The menu item prices calculated were compared with the traditional costing method and those differences are clearly explained through the menu engineering technique. The approaches to handling businesses during inflation are mentioned. Understanding the approaches to reduce costs and realizing the benefits of the activity-based costing method to provide accurate product or service costs is essential for the management to make informed decisions. The activity-based costing method is gaining popularity in different business sectors and is interesting to study its benefits. The research concludes with recommendations for future study and analyzes how well the research questions are answered.