Abstract
Traditional cost accounting systems have been replaced in recent years in the manufacturing sector by Activity-Based Costing (ABC) systems. This study tests and demonstrates whether the incorporation of ABC data into traditional menu engineering methods provides food service managers with an improved tool for cost and profitability analysis. The study uses ABC data collected from a restaurant in a western urban area of the United States. The results reveal that ABC Menu Engineering is a superior method for establishing overall menu profitability, and that a restaurant manager's menu management decisions will change dramatically if he or she is confronted with differing results from a contribution margin menu engineering analysis and an ABC approach.
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