Professional Documents
Culture Documents
INTRODUCTION
Introduction
Total Costs Direct Materials Direct Labor Overhead
Direct Tracing Driver Tracing Allocation
Direct Tracing Direct Tracing Direct Tracing
OBJECTIVES OF STUDY
Objectives
To define costing method currently applied in a company
1 2
3
COMPANY BACKGROUND
Company Background
General Manager
Personal Assistant
Food & Beverage Executive Food & Beverage Supervisor Food & Beverage Captain Waiter & Waitress
Head Chef
Housekeeping Supervisor
Assistant Accountant
Administrative Assistant
Maintenance Officer
Security Officer
Finance Assistant
IT Officer
Cook
Chief Steward
Storekeeper
Butcher
Steward
Landscape Assistant
Commis
Staff Category Permanent Staff Contract Staff Part-time Staff Casual-permanent Staff
Position 0 49 Total
Fulfilment 0 54 0 25 79
Company Background
Subsidiary to Government-owned Company
-To expose students to the world of hospitality -To create job opportunities -To create profit Objective
Lodging
Decision Making
Banqueting
Standard Rooms
Financial
Dinner
Any disbursement -Observe by Bursary of its main Company -Bursary responsible in verifying any expenses & activities
Suite 1
Wedding
Seminar
Suite 2
Financial sources i. Income from services ii. Gov grants (provided yearly)
Costing Approach
Total Costs
Variable Costs
Direct Tracing
Fixed Costs
$ room/night
This is how The Hotel currently compute cost for Standard Room (refer Table I). To find cost room/night, they simply divided total cost by day usage (300 days) and summed up all the costs. Product/Service Traditional Method This is apparently a traditional method! After computing the cost of room rates, managers will sit in a meeting. Cost room/night will determined by their consent.
APPLYING ABC
Methodology
Interview
Interview key people in financial department To collect information regarding costing approach currently applied in The Hotel
Data
The Hotel only providing us costs for standard rooms Confidentiality factors
Observation
Limitation!
Methodology
Due to these limitations, we are not having enough data to calculate costs for Standard Room using ABC. Thus, we cannot see the different and comparing total costs of both methods.
Time Constraints
Confidentiality
We proceed this study by proposing ABC framework for The Hotel (to be specific on lodging because the data obtained is on Standard Room) and delineate information required in performing ABC.
ABC
Direct Materials Direct Labor Overhead
Direct Tracing Driver Tracing Allocation Direct Tracing Direct Tracing
1st We group the costs based on category of DM, DL and OH (refer Table II). Costs for DM & DL can be trace directly for room/night. 2nd To allocate OH costs, we have to discover overhead costs incurred, activities involved in lodging and find appropriate cost driver.
ABC
Before After
survey
Check-in
Register
Accommodation
Foods/Beverages
Check-out
Follow-up service
Front Office
Reservation Check-in, check-out Opening & closing customer account
Housekeeping
Cleaning Making beds Vacuuming Replenishing linens & other stuffs
Marketing
Arrange visits Giving information Advertisement
ABC
ABC
Allocation of resource cost to activity cost pools
Costs of Resources for Lodging Cleaning & Laundry
Depreciation
General
Facilities
Purchasing
Storing
Maintenance
Depreciation on building
Electricity, water
Goods
Goods
Service
Resource drivers
Front Office
Housekeeping
Marketing
ABC
Allocation of costs of activity cost pools to types of rooms
Activity Costpools
Foods & Beverages Preparation Number of Covers
Front Office
Housekeeping
Marketing
Number of arrivals
Number of nights
Number of Visits
Refer Table IV
Types of Room
Standard Room
Suite 1
Suite 2
CONCLUSION
Finding
Many managers concern the advantages of using ABC compare to traditional approach While the others refused for ABC because of its complexity and time consuming
But, most of them believed that ABC is practicable only to production not services
Conclusion
Above all, ABC method is not difficult as many managers think As long as they understand the concept, know where to start, hoe to implement & maintain the process ABC system will definitely valuable and handy method Above and beyond, ABC will benefit the hotel with relevant cost information and ease the process of decision making
There is no wrong in practicing the traditional method But, computing more accurate data is a root to better decision making As a matter of fact, a good decision making in short-tem can be a determinant of sustainability of the hotel in a long term
Recommendation
Find a company that can give full cooperation
To provide costing data So, can differentiate total costs incurred by both methods
Q&A SESSION