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 analyse the costing system of a restaurant (Caf Deluxe) which is situated on a beach side tourist area. Your supervisor has recently attended a business conference where he was introduced with an improved costing system, Activity Based Costing. Caf Deluxe presently uses traditional costing method and they want your help to explore the adoption of Activity based costing systems. In your first visit you have noticed that it is a sit-down restaurant and offers menu dining. The corporate marketing manager is considering introducing a buffet menu at Caf.

Required:

a) Explain the types of decisions Caf Deluxe faces under normal business circumstances and the associated management accounting information required by the Caf management.b) Do you think the profitability of restaurant services (Buffet and menu dining) may be affected by this costing system change?c) Identify value added and non-value-added activities at Caf Deluxe.d) Classify the activities at Caf Deluxe into 3-5 groups and identify activity drivers for each of the group of activities.