Activity-based costing: A more accurate way to estimate the costs for a restaurant menu

Activity-Based Costing (ABC) has been successfully applied in the manufacturing industry for the last two decades. In this study, a workable ABC model for restaurants was created and tested in a restaurant operation in a western urban area of the United States. The study identified that the actual cost of the dinner entrees was higher than the restaurant’s prices, when analyzed using ABC methods. The results revealed that ABC appears to be a very feasible method for establishing accurate menu costs in restaurants.