Exercise 13-31 (Algo) Target Costing Using Quality Function Deployment (QFD) [LO 13-1]

Ricks is a popular restaurant for fine dining. The owner and chef, Rick Goetz, is pleased with his success and is now considering expanding his existing restaurant or perhaps opening a second restaurant. Before making his decision, Rick wants to find out more about his competitive position. There are three other restaurants that compete directly with him on food quality and price. Rick knows that his profitability depends on his ability to provide a satisfying meal at the market price. His first step was to gather some information about his customers, using an independent market research firm, which informed him that his customers were looking for taste, comfort (the ambiance, service, and overall presentation of the food), and enjoyment (the distinctiveness of the dining experience, a degree of excitement). He was surprised to find that comfort and enjoyment ranked highest:

First: Customer Criteria and Ranking
	Importance	Relative Importance
Taste	37	12.89%
Comfort	90	31.36
Enjoyment	160	55.75
Total	287	100.00%

Next, he worked with his key wait staff and chefs to try to identify the three main components, and related costs, of the service Ricks provides:

Second: Components and Cost
Components	Cost	Percent of Total
Menu and food preparation	$ 18	31.03%
Wait staff	23	39.66
Food ingredients	17	29.31
Total	$ 58	100.00%

Having the customer criteria and components, Rick now again worked with his staff to assess how each component contributes to the desired customer criteria:

Third: Determine How Components Contribute to Customer Satisfaction
	Customer Criteria
Components	Taste	Comfort	Enjoyment
Menu and food preparation	38%	28%	44%
Wait staff	28	44	28
Food ingredients	34	28	28
Total	100%	100%	100%

Required:

1. Using the information Rick has developed, determine the importance index for each component (menu and food preparation, wait staff, and food ingredients).

2. Calculate the ratio between the relative cost percentages for each component and your findings in Requirement 1. Determine what action Rick should take on each component.