Exercise 13-31 (Algo) Target Costing Using Quality Function Deployment (QFD) [LO 13-1]
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Course
Accounting
Institution
Accounting
Answer to:
Exercise 13-31 (Algo) Target Costing Using Quality Function Deployment (QFD) [LO 13-1]
Rick’s 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 rest...
Question:
Exercise 13-31 (Algo) Target Costing Using Quality Function Deployment (QFD) [LO 13-1]
Rick’s 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 Rick’s provides:
Second: Components and Cost
Components Cost Percent of Total
Menu and food
$ 18 31.03%
preparation
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.
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