The application of activity‐based costing to a support kitchen in a Las Vegas casino

Abstract

PurposeThe paper aims to examine the activity‐based costing (ABC) method as a feasible and appropriate tool for the casino and hotel industry to apply to support kitchens in order to eliminate the monthly allocation of overhead based on variable costs.Design/methodology/approachData were collected at a support kitchen in a Las Vegas casino. These data were analyzed by using ABC methods and establishing ABC costs. ABC methods were compared to traditional allocation methods to determine, first, if allocations could be eliminated entirely; and, secondly, to establish if some outlets would be significantly impacted by the accounting change.FindingsAn ABC approach can be applied to support kitchens and total cost (ABC) can be estimated. This approach allowed the casino to eliminate traditional allocation methods based solely on food cost.Research limitations/implicationsABC was shown to be a powerful technique that can be applied effectively in a support kitchen of a casino. Since this paper involved only a single support kitchen in a single casino, further research should be conducted to confirm that ABC can also be applied in support kitchens in other hospitality industry settings.Practical implicationsThe use of ABC techniques confirmed that the ABC process is a useful tool in an effort to abolish allocations and can be applied to the remaining support kitchens. Without the benefit of this paper, restaurant management for individual food and beverage outlets received an unfair share of the overhead and did not have appropriate cost information for bread products.Originality/valueABC may be a powerful technique when applied effectively to the food and beverage operations in the field of hospitality.