Activity-Based Costing System: Application in a Hotel Business

Abstract

Activity-Based Costing (ABC) system is the distribution of the costs incurred in the business to the activities first and then the distribution of the costs allocated to the activities to the products/services. The aim of this study is to show how to calculate unit costs and applicability by using Activity-Based Costing system in a hotel business. Therefore, the case study method was used. In the study, it was determined that there are two different customer groups, namely X Type (customers who stay according to the all-inclusive concept) and Y Type (customers who stay full board) who come to the hotel in june-july-august. The number of beds sold to these customer groups along the 3-month period has been determined. After that, the activities and activity centers of the hotel business were determined. Then, the resources consisted in the hotel business as from a three-month period were determined and these resources were distributed to the activity centers through different resource drivers. Finally, the costs of the activities were allocated to cost objects (cost of beds sold to customer groups) with the help of cost drivers (number of beds sold to customer groups). As a result, it has been determined that the unit cost of the X Type customer group is higher than the unit cost of the Y Type customer group. It has been determined that the Activity-Based Costing system is applicable in hotel businesses.