Enhancing Profitability in the Food Industry: An Empirical Study on Activity-Based Costing and Menu Engineering
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Mentor Information
Dr. Jennifer Cainas
Description
The food industry, characterized by thin margins and high competition, necessitates precise cost control and strategic menu planning for profitability. Traditional costing methods may not accurately reflect the true costs of dish preparation, leading to potential underpricing and misinformed decisionmaking. This thesis explores the application of Activity-Based Costing (ABC) and Menu Engineering in the food industry as tools to enhance financial outcomes. Through an empirical study involving the analysis of four dishes from a cooperating restaurant, this research compares traditional costing methods against ABC, focusing on activities such as prepping and cooking to allocate overhead more accurately. The study employs real data to calculate the true cost and profitability of each dish, which, combined with their popularity, informs strategic menu engineering decisions. The hypothesis posits that integrating ABC costing with Menu Engineering provides a comprehensive view of a restaurant’s expenses and profitability, leading to informed decisions that could boost sales. The expected results include identifying underperforming dishes and recommending menu adjustments to optimize profitability. This research aims to contribute to the limited literature on accounting practices in the food industry, offering managers and restaurant owners valuable insights for data-driven decision-making. Ultimately, this study emphasizes the potential of ABC costing and Menu Engineering to improve financial strategies within the food sector.
Enhancing Profitability in the Food Industry: An Empirical Study on Activity-Based Costing and Menu Engineering
The food industry, characterized by thin margins and high competition, necessitates precise cost control and strategic menu planning for profitability. Traditional costing methods may not accurately reflect the true costs of dish preparation, leading to potential underpricing and misinformed decisionmaking. This thesis explores the application of Activity-Based Costing (ABC) and Menu Engineering in the food industry as tools to enhance financial outcomes. Through an empirical study involving the analysis of four dishes from a cooperating restaurant, this research compares traditional costing methods against ABC, focusing on activities such as prepping and cooking to allocate overhead more accurately. The study employs real data to calculate the true cost and profitability of each dish, which, combined with their popularity, informs strategic menu engineering decisions. The hypothesis posits that integrating ABC costing with Menu Engineering provides a comprehensive view of a restaurant’s expenses and profitability, leading to informed decisions that could boost sales. The expected results include identifying underperforming dishes and recommending menu adjustments to optimize profitability. This research aims to contribute to the limited literature on accounting practices in the food industry, offering managers and restaurant owners valuable insights for data-driven decision-making. Ultimately, this study emphasizes the potential of ABC costing and Menu Engineering to improve financial strategies within the food sector.
