Activity-Based Costing: a Case Study on a Taiwanese
Activity-Based Costing: a Case Study on a Taiwanese
Hot Spring Country Inn’s Cost Calculations
Wen-Hsien Tsai
Department of Business Administration National Central University, Chung-Li, Taiwan, ROC
Jui-Ling Hsu
Department of Business Administration National Central University, Chung-Li, Taiwan, ROC
Department of International Trade
Ta-Hwa Institute of Technology, Hsin-Chu, Taiwan, ROC
Abstract
The aim of this paper is to analyze the operational costs of a hot spring inn in the Yang-Ming-Shan area of Taiwan. The activity-based costing method was used to compute lodging, hot spring use and meal serving costs per customer. This paper overcomes all the obstacles to implementing full-scale ABC-based accounting to this hot spring country inn. In this case, products, defined as hot spring use, lodging and meal serving are used as the cost objects. We define five activity centers: the cleaning activity center, the customer service center, the cooking and foodservice center, the reception service center and the management center. Finally, we use the ABC method to calculate the costs of hot spring use, lodging and meal serving as NT$ 31.64, NT$ 306.21 and NT$ 67.28 per customer respectively in the busy winter seasons. The paper also compares the ABC method with the traditional costing method and concludes that the ABC method is practical and appropriate for such a hot spring country inn and yields more accurate information for cost management and pricing decisions.
Key Words: Activity-Based costing, Country Inn, Hot Spring, Cost Analysis
1. Introduction
Researchers in management accounting have traditionally been, above all, interested in the accounting systems of large manufacturing companies. Most accounting researchers interested in service production have conducted their research in non-profit seeking, public-sector organizations (Pellinen 2003, p. 217). Outside the non-profit sector, the number of studies on the management
Hot Spring Country Inn’s Cost Calculations
Wen-Hsien Tsai
Department of Business Administration National Central University, Chung-Li, Taiwan, ROC
Jui-Ling Hsu
Department of Business Administration National Central University, Chung-Li, Taiwan, ROC
Department of International Trade
Ta-Hwa Institute of Technology, Hsin-Chu, Taiwan, ROC
Abstract
The aim of this paper is to analyze the operational costs of a hot spring inn in the Yang-Ming-Shan area of Taiwan. The activity-based costing method was used to compute lodging, hot spring use and meal serving costs per customer. This paper overcomes all the obstacles to implementing full-scale ABC-based accounting to this hot spring country inn. In this case, products, defined as hot spring use, lodging and meal serving are used as the cost objects. We define five activity centers: the cleaning activity center, the customer service center, the cooking and foodservice center, the reception service center and the management center. Finally, we use the ABC method to calculate the costs of hot spring use, lodging and meal serving as NT$ 31.64, NT$ 306.21 and NT$ 67.28 per customer respectively in the busy winter seasons. The paper also compares the ABC method with the traditional costing method and concludes that the ABC method is practical and appropriate for such a hot spring country inn and yields more accurate information for cost management and pricing decisions.
Key Words: Activity-Based costing, Country Inn, Hot Spring, Cost Analysis
1. Introduction
Researchers in management accounting have traditionally been, above all, interested in the accounting systems of large manufacturing companies. Most accounting researchers interested in service production have conducted their research in non-profit seeking, public-sector organizations (Pellinen 2003, p. 217). Outside the non-profit sector, the number of studies on the management