Pick a fast-food or sit-down restaurant and visit the one nearest you.
What is the name and address of the restaurant you chose? Post a picture of the front of this restaurant in the reply text box. Do not attach a graphic file. The picture should be uploaded into the textbox of this reply for all students and instructor to view without having to open an attachment.
2. Spend some time and observing the operations at the restaurant. The best way to do this is to go inside of the restaurant and observe for 10 minutes or more. Take notes. Answer the following questions:
a) How many people does it take to fulfill a typical order? Describe the various employees involved and what their task was.
b) Describe in detail each activity involved in the food service process. Include all activities that you observed in your time at the restaurant. This could include order taking, processing or making the meal, serving, cleaning, and any other activity involved to fulfill orders and complete the process of food service.
3. Describe the costs (for example, wage of employee, food inventory, serving dishes, etc etc) involved for each activity identified in # 2 above). You do not need to include the dollar amounts since you do not know what employees actually make. List the activities and the costs. Once you have a completed list of activities and the cost associated with the activity, classify each cost as Direct Labor DL, Direct Material DM, or Overhead Cost (Indirect labor, Indirect Material or Overhead). For Example, the server costs would include employee wages, benefits (insurance, vacation, etc.). There are other costs associated with an employee, can you think of any other costs for having the employee on the payroll? These costs would be classified as direct labor.
4. You have been assigned as the managerial accountant who keeps track of the restaurant product costs. You are responsible for determining the product cost (all costs of business allocated to each product based on a cost object or allocation base) of each item on the menu, You are also responsible for setting the price to the customer. Based on what you have learned in chapter 17 and your observation of restaurant activities, what do you think would be the best “Cost Object” or “Allocation Base” to allocate the overhead of the restaurant? Describe in words the cost allocation base you would use to allocate the overhead of the restaurant to the product to determine total product cost. You do not need to list dollar amounts, just the base you believe should be used.
5. Price setting of products is one of the most important jobs of the managerial accountant. It will determine the sales generated by the company as well as have an impact on volume of sales to customers. If price is set too high, sales volume decreases and if the price is set too low, there is a risk of not being able to pay for all of the costs that are incurred in operating the business. The starting point of setting prices is of course the cost of the product (#4 above), however, management must consider other factors. What other factors do you believe should be considered when setting the price of the product to the customer?
