Determination of costs is an essential aspect of every business. It is important to determine the costs of product produced in order to avoid making losses. Small-scale businesses may overlook the role of costing but affects the progress of the business in the end. I am a supervisor overlooking general operations at a middle-class restaurant. The organizational structure of the restaurant vests upon me the duty of monitoring the inflow of all inputs. As such, proper costing is necessary for my position to ensure that the restaurant is making progress.
The restaurant has lagged behind in ensuring effective cost determination a habit that has crippled the performance of the restaurant. The lack of effective cost determination has seen the restaurant fail to meet some of the essential obligations of paying employees and sometimes had to borrow in order to pay rent ( Fabozzi, 2016 ). My goal is to instill this spirit and make the restaurant financially stable.
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Since the restaurant is majoring in middle-class services, we get many clients. Cost breakdown would enhance balancing of prices to meet all expenses and still make a profit, determine normal realistic prices. This task will include the addition of all taxes and VATs, rent and the employees’ salaries ( Fabozzi, 2016 ). Such elements were assumed which led to some terrible loses. Loses resulting from weight reduction during the preparation of meals will also be cut down since efficient cost determination will take account of this factor. Those considered in cost determination include direct material costs, labor costs, factory overhead and consumables ( Fabozzi, 2016 ). These are daily routines observed in a business cycle.
Overall, product costing is a must use tool for enhancing productivity and competency in the business world. It helps to minimize loses and enhance profit making. With a thorough application of this tool, the restaurant is bound to make a realistic progressive profit and increase its customer base.
References
Fabozzi, F. J. (2016). Entrepreneurial finance and accounting for high-tech companies. Cambridge, MA: MIT Press.
