THH3113 Cost & Performance Management for Tourism & Hospitality

This report provides a comprehensive analysis of cost and performance management within the tourism and hospitality industry, specifically focusing on Sunshine Continental Restaurant. It delves into cost driver analysis, identifying volume, time, and charge as key factors influencing costs. The report highlights the significance of volume as a cost driver for the restaurant, evidenced by increased sales revenue and the need for expanded production capacity. It also discusses the impact of time-related costs and various charges, such as employee wages and operational expenses. The analysis suggests that Sunshine Continental Restaurant should prioritize the volume cost driver, potentially investing in new equipment and qualified accounting professionals to optimize sales decisions and manage rising market demand. The report references academic sources to support its analysis of cost accounting principles and their application within the context of the restaurant's operations.

Running head: COST AND PERFORMANCE MANAGEMENT FOR TOURISM AND
HOSPITALITY
Cost and Performance Management for Tourism and Hospitality
Name of the Student:
Name of the University:
Author’s Note:
Course ID:

1COST AND PERFORMANCE MANAGEMENT FOR TOURISM AND HOSPITALITY
Table of Contents
Answer to Question 2:................................................................................................................2
References:.................................................................................................................................4

2COST AND PERFORMANCE MANAGEMENT FOR TOURISM AND HOSPITALITY
Answer to Question 2:
Cost driver analysis implies evaluating the likely cost drivers for a specific kind of
cost or activity along with describing the cause and effect relationship between activity and
cost driver. In case of Sunshine Continental Restaurant, there are basically the following
kinds of cost drivers, which are enumerated briefly as follows:
Volume:
The cost driver is reliant on the units of work such as the number of orders. The cost
of the activity increases with the increase in the processing of additional units (Edmonds et
al. 2016). For the concerned restaurant, this cost driver has the most significant impact, which
could be observed from its profit and loss statement. According to the budgeted figure of
2017-2018, the sales revenue is estimated at $786,000, while the actual amount that has been
earned is $982,500. This denotes positive increase in sales volume for the restaurant and
additional units are produced to ensure the increased sales volume. This could be validated
with the help of increased cost of sales of $190,000 than the budgeted figures of $175,000.
Time:
The cost driver is dependent on the amount of time undertaken for completing each
activity (Parker and Fleischman 2017). The activity cost is deemed to increase depending on
the amount of time needed to finish each activity. However, it has no impact on the number
of units manufactured and thus, labour hours are taken into consideration. For instance, at the
time of retooling the machines, the cost driver is the amount of time needed to finish machine
retooling. In case of the restaurant, this could have a significant role, as timely completion of
each activity would lead to efficient distribution of resources. As observed from the profit

3COST AND PERFORMANCE MANAGEMENT FOR TOURISM AND HOSPITALITY
and loss statement, the sales revenue has increased, which means that additional units are
produced by expanding the capacity of the machine.
Charge:
According to Bierer et al. (2015), the cost for the overall activity is directly charged to
the cost object. For instance, all the costs related to the machine retooling for a product is
directly charged to the final product. In case of Sunshine Continental Restaurant, there are
many different types of expenses like bank charges, credit card commission, business
insurance, marketing and promotional expenses, superannuation and others. The other
expenses include the commercial property taxes to the government and advertising cost like
laundry expenses and electricity. In this case, the maximum variance could be observed in
case of casual employee wages by $100,000 in the year 2017. This implies that the restaurant
has to hire additional individuals since the estimated demand for its food products is lower
compared to the actual demand (Christ and Burritt 2015).
However, Sunshine Continental Restaurant uses the charge-type activity driver rarely.
In this case, the volume-type cost driver is provided adequate importance and thus, the
restaurant is needed to expand its production capacity. For this, it needs to consider
purchasing new equipment so as to cope with the rising market demand. Qualified accounting
professionals need to be appointed so that appropriate decisions regarding sales decisions
could be undertaken by the restaurant. Hence, based on the above evaluation, it could be
stated that Sunshine Continental Restaurant is required to lay emphasis on the volume cost
driver.

4COST AND PERFORMANCE MANAGEMENT FOR TOURISM AND HOSPITALITY
References:
Bierer, A., Götze, U., Meynerts, L. and Sygulla, R., 2015. Integrating life cycle costing and
life cycle assessment using extended material flow cost accounting. Journal of Cleaner
Production, 108, pp.1289-1301.
Christ, K.L. and Burritt, R.L., 2015. Material flow cost accounting: a review and agenda for
future research. Journal of Cleaner Production, 108, pp.1378-1389.
Edmonds, T.P., Edmonds, C.D., Tsay, B.Y. and Olds, P.R., 2016. Fundamental managerial
accounting concepts. McGraw-Hill Education.
Parker, L.D. and Fleischman, R.K., 2017. What is Past is Prologue: Cost Accounting in the
British Industrial Revolution, 1760-1850. Routledge.