Value management and activity based costing model in the Tunisian restaurant

Abstract

Purpose

The purpose of this study is to show how using value management (VM) together with activity based costing (ABC) for menu analysis helps managers to estimate contribution margins more precisely and to analyze customer satisfaction. This new approach is considered an appropriate tool for guiding and directing the process of making decisions.

Design/methodology/approach

In this research a case study is employed to examine whether the application of the ABC/VM approach can improve the decision‐making process in a Tunisian à la carte restaurant. Data were collected over the period of a month using direct observations of restaurant activities to calculate profitability, and a questionnaire was administered to determine customer satisfaction.

Findings

The results show that six of 11 menu items were profitable. The results also show that managers should analyze profitability and customer point of view simultaneously in order to inform the decision‐making process.

Research limitations/implications

Only a single à la carte‐style restaurant and the dinner menu was examined in this study. Future research should apply the model to other restaurant types in order to validate the model.

Practical implications

The paper suggests that using activity based costing with value management can enhance the quality of the decision‐making process. It demonstrates to managers how they can reduce their costs and improve resource allocation, taking into consideration customer needs and satisfaction.

Originality/value

The paper combines two analytic techniques (VM and ABC) that reveal a menu's true profit and loss picture and a menu item's value.

Citation

Ben Hadj Salem‐Mhamdia, A. and Bejar Ghadhab, B. (2012), "Value management and activity based costing model in the Tunisian restaurant", International Journal of Contemporary Hospitality Management, Vol. 24 No. 2, pp. 269-288. https://doi.org/10.1108/09596111211206178