As a new graduate employee in a hospitality company, you are being introduced to the staff. The company owns several businesses. You have been informed that your initial job will require you to analyze the costing system of a restaurant which is situated in a beachside tourist area.

Your supervisor has recently attended a business conference where he was introduced to an improved costing system, Activity Based Costing. Café Deluxe presently uses traditional costing methods and they want your help to explore the adoption of Activity-based costing systems.

On your first visit, you noticed that it is a sit-down restaurant and offers menu dining. The corporate marketing manager is considering introducing a buffet menu at Café.

• Evaluate the existing costing system. What steps would you take to adopt an activity-based costing system at Café Deluxe?
• Identify value-added and non-value-added activities at Café Deluxe.
• Classify the activities at Café Deluxe into 3-5 groups and identify activity drivers for each of group of activities.
• Explain how management accounting information can help management to take a buffet menu offering decision.