Buenos Dias plc is a Spanish hotel group operating across Western Europe. It provides economy-class hotels close to major roads.
You are provided with the following information:

All hotels have 80 bedrooms, with double beds, and operate for 365 days per year.

Sales volume is measured in room nights. Guests are charged per room per night (regardless of
single or double occupancy), including buffet breakfast.

A light bites and beverages menu is offered 14.00 - 22.00 each day.
The first Buenos Dias hotel in the UK opened in April 2017, near Exeter Junction 31 of the M5 (see Appendix I). This location was chosen as it is at a major point in the UK road network connecting visitors to key tourist locations in Devon and Cornwall (via the A30 and A38).
Reviews are being undertaken on cost performance, pricing, operational management, and longer-term proposals. For ease of analysis, 30-day months are assumed.
You are a management consultant providing evaluations and recommendations on elements of this review to the Buenos Dias , as specified.

 

 

QUESTION : 
A further decision for the hotel concerns its buffet breakfast. Given its location, the hotel manager is considering also offering this to outside customers between 8am and 10am. However, this requires determination of a price to charge.
An accounting-based approach considers the following data

 -Direct food and beverage costs are estimated at £3.35 per person.

-The budgeted average hotel overhead costs per month are £30,000. It is considered that 1/3 of
overheads are attributed to the operation of the kitchen, such as salaries and wages for serving
staff, chef and kitchen assistants, and utilities.

-Mark-up is 40% of full cost.
A kitchen overhead absorption rate would be calculated using food service labour hours of 1,500 per month. Although it is a buffet offering, it is estimated that the equivalent labour time per breakfast requires 20 minutes (0.33 hours). This is based upon costs of daily activities of purchase, storage, preparation, presentation, replenishment, table set-up, clearance, and re-set, and customer service as well as kitchen management and hygiene.
The activity-based costing (ABC) method is also being used for pricing and operating purposes. Kitchen activities have been categorised under 3 broader categories. The following monthly (30-day) information has been estimated for this purpose:

Requirement ：

1) Evaluate and advise on the costing and pricing of the breakfast as part of the proposal to expand its customer base.

Transcribed Image Text:

Activity Purchase, Delivery, Storage (PDS) Preparation Service Cost £ 1,000 6,000 3,000 Driver Supplier Orders Meals Rooms Total 20 3,000 2,000 Breakfast 15 2,400 1,500 Activity Purchase, Delivery, Storage (PDS) Preparation Service Cost £ 1,000 6,000 3,000 Driver Supplier Orders Meals Rooms Total 20 3,000 2,000 Breakfast 15 2,400 1,500

Answer rating: 100% (QA)

To evaluate the costing and pricing of the breakfast we can use both the accountingbased approach and activitybased costing ABC method Using the accou... View the full answer