Comprehensive Project Costing
Part 1:
Restaurants offer a variety of menu items which have different sizes,
ingredients, packaging, and demand. In addition, made-to-order
restaurants go one step further and may have different renditions of the
same menu items based on how a customer orders them. Take for example,
Chipotle, for the same price, steak tacos could be “crispy” or “soft”,
may have white, brown, or no rice, may or may not contain one of three
types of salsa, could have cheese or sour cream or neither, and may or
may not have lettuce, black or pinto beans, or other vegetables.
Combinations for that one menu item are virtually endless!
Profit
margins in the restaurant industry are small, and operating costs are
high. Good product costing is essential for survival in the business.
This project option will allow you to apply your knowledge of product
costing to the restaurant industry.
- Select a nationally recognized fast casual restaurant chain that offers made-to-order menu items, except a restaurant primarily engaged in making pizza. Some examples would be Chipotle Mexican Grill, Five Guys, Noodles & Co., Panera Bread, and Dunkin Donuts.
- For
the restaurant chain you have selected, you will need to research and
locate company information, menus, and financial information to assist
you with the requirements of this project. - Not every chain will
have the same financial information available, so it may be necessary to
generate your own “fictitious” data in order to complete the required
tasks. If you do need to create data, be clear in your
computations which data is taken from publicly available information
(provide the sources) and which data has been generated by you.
- For
- Choose
3 menu items from the menu of the restaurant. Familiarize yourself with
the products including the ingredients, processing method, general
selling price in your area, packaging requirements, and accessories
(straw, sweetener, fork/knife, condiments, etc.). Submit your selected
restaurant chain to your instructor and write 1-2 paragraphs on your
rationalization for selection, noting which portfolio option you
selected, in Microsoft Word. In addition, create a chart in Microsoft
Word with the 3 menu items that you have chosen and populate it with the
data you have researched on each of those items regarding ingredients,
variance in preparation, price point, packaging, accessories, and any
other relevant information you feel is helpful.
Part 2:
- From
the cost information you were able to find or generated on your own,
provide responses in Microsoft Excel to the following questions.
Reference your calculations to show tracing where numbers come from.
(For assistance with Microsoft Excel, please refer to Lynda.com for
tutorials.)- Compute the cost of each product under the simple/traditional costing method. For period costs, use direct labor hours.
- Compute the net operating profit margin of each product using the simple/traditional costing method.
- Compute the total overhead and period cost allocation under activity-based costing (ABC) assumptions for each product.
- Compute the per unit ABC cost of each product.
- Compute the net profit margin of each product using the ABC costing method.
- Compare
the net profit margin of the products under the simple/traditional cost
assignment and the ABC assignment for each product. Evaluate the
difference.
- In a Microsoft Word document, write an
accompanying memo explaining to the CEO what the costing methods are,
the differences between the methods, and which method seems to make
sense in this scenario. Also include the pros and cons of the method you
are recommending, and why you feel the pros outweigh the cons.
Your paper should meet the following requirements:
- Minimally 7-10 pages in length (not including the title page and the reference page).
- Assignment should follow APA guidelines with respect to use of subheadings, 1” margins, and double spacing.
- References
should include your textbook plus 2 additional credible academic
references. All sources used, including your textbook must be
referenced; paraphrased and quoted material must have accompanying
citations and cited per APA guidelines. - Use of CSU Global Library is necessarry
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