| Traditional cost accounting systems have been replaced in recent years in the manufacturing sector by activity-based costing (ABC) systems. In spite of this trend in manufacturing, ABC systems have made few inroads in the services and hospitality sector, particularly in the restaurant industry. In this study, an activity-based cost model for restaurants was created and tested in a restaurant operation in a major city of the Western United States. Further, an ABC menu engineering analysis was created for the purpose of testing the feasibility of the ABC approach. Twelve hypotheses were constructed that tested the relationships between the restaurant manager's perceptions, traditional menu engineering methods and contribution margin analyses, and ABC menu engineering and operating profit scores. The results revealed that the application of activity-based costing is, in fact, a feasible method for establishing overall menu profitability. |
