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Modelling activity‐based costing in restaurants

Modelling activity‐based costing in restaurants Purpose – This paper seeks to demonstrate an application of a methodology, which is based on the integration of three techniques, with the purpose of modelling activity‐based costing (ABC) in restaurants. The proposed methodology serves as a tool for effectively computing values of cost drivers in the restaurant industry, as well as making accurate cost estimations. Design/methodology/approach – The methodology is based on the integration of three techniques: simulation modelling, association rule mining (ARM) and ABC. Simulation modelling is used to model process variability and produce a range of cost values, instead of a point estimate of the cost, by generating a range of values for the simulated cost drivers. The advantage of the proposed methodology lies on the effective utilization of ARM in the ABC model; it extracts dependencies between a cost driver, whose estimation is time‐consuming, with another cost driver, which can easily be calculated. These associations can assist the estimation of the empirical distributions of those cost drivers, which were difficult to calculate. Findings – The extracted associations verify the hypothetical relations between the cost drivers. The output produced is more precise values of the cost drivers that are included in an ABC model and were difficult to estimate. More accurate cost estimate means better pricing decisions for the restaurant managers. Originality/value – The proposed methodology is an innovative technique that provides more accurate accounting information in the restaurant industry. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Modelling in Management Emerald Publishing

Modelling activity‐based costing in restaurants

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References (41)

Publisher
Emerald Publishing
Copyright
Copyright © 2011 Emerald Group Publishing Limited. All rights reserved.
ISSN
1746-5664
DOI
10.1108/17465661111183676
Publisher site
See Article on Publisher Site

Abstract

Purpose – This paper seeks to demonstrate an application of a methodology, which is based on the integration of three techniques, with the purpose of modelling activity‐based costing (ABC) in restaurants. The proposed methodology serves as a tool for effectively computing values of cost drivers in the restaurant industry, as well as making accurate cost estimations. Design/methodology/approach – The methodology is based on the integration of three techniques: simulation modelling, association rule mining (ARM) and ABC. Simulation modelling is used to model process variability and produce a range of cost values, instead of a point estimate of the cost, by generating a range of values for the simulated cost drivers. The advantage of the proposed methodology lies on the effective utilization of ARM in the ABC model; it extracts dependencies between a cost driver, whose estimation is time‐consuming, with another cost driver, which can easily be calculated. These associations can assist the estimation of the empirical distributions of those cost drivers, which were difficult to calculate. Findings – The extracted associations verify the hypothetical relations between the cost drivers. The output produced is more precise values of the cost drivers that are included in an ABC model and were difficult to estimate. More accurate cost estimate means better pricing decisions for the restaurant managers. Originality/value – The proposed methodology is an innovative technique that provides more accurate accounting information in the restaurant industry.

Journal

Journal of Modelling in ManagementEmerald Publishing

Published: Nov 1, 2011

Keywords: Activity‐based costing; Modelling; Simulation; Data mining; Restaurants; Cost drivers

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