Economics and Finance Review Vol. 1(8) pp , October, 2011 ISSN: Available online at

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1 IMPLEMENTATION OF TIME-DRIVEN ACTIVITY-BASED COSTING SYSTEM AND CUSTOMER PROFITABILITY ANALYSIS IN THE HOSPITALITY INDUSTRY: EVIDENCE FROM IRAN ABSTRACT Zohreh Hajiha (Corresponding Author) Department of Accounting, East Tehran Branch, Islamic Azad University (IAU), Human Science faculty, Iran, Tehran. Postal Address: Islamic Azad University, East Tehran Branch(Ghiamdasht), Khavaran Avenue, Ghiamdasht Complex, Bahonar Street, Tehran, Iran Samad Safari Alishah Master student in accounting, Islamshahr Branch, Islamic Azad University (IAU) Postal Address: Islamic Azad University, Islamshahr Branch, Islamshahr Town, Tehran, Iran The purpose of this paper is examination of implementation feasibility of time-driven activity-based costing system (TDABC) in hospitality industry and analyzes profitability of various costumer groups by this system in Iranian context. The results of this system were compared with those of traditional costing system in an Iranian large hotel named Parsian Hotel (as a case study). Regarding to the goal of the subject, this is an application research by case study. The results showed that using TDABC model, in comparison with the existing traditional system in Parsian Hotel, provides more proper data on cost and profitability of customers. Also, the proposed model distinguishes non-added value activities and demonstrates real capacity of each parts of the hotel. Therefore, managers of service companies, especially in hospitality industry, can calculate necessary time for activities by time equations in TDABC. Thus they can do necessary actions to decrease this time and increase hotels profitability. Keywords: TDABC,customer profitability analysis, hospitality industry. 1. INTRODUCTION One of the main challenges of conservation of service organizations is development of cost information for strategic decision-making and proper pricing of services. Because of the existing competitive space, a suitable costing system to obtain this information is necessary in service institutions specially hospitality industry. cost data is necessary for managerial decision-making. Knowing this point that which customer is profitable, helps organizations to improve their decision-making and increase their total profitability (Kuchta & Troska, 2007). Regarding to size and complexity of constitutions of service companies, knowing profitability of different customer groups is necessary for these companies. In the view of Bitner et al (1998), expense of finding a new customer in a service company is five times than preserving current customer. In service companies, service costs are determined by customer s behavior. Thus, knowing customers cost information is necessary to maintain profitable relations for service institutions and companies(rahnamay Roodposhti, 2009). Time-driven activity-based costing system (TDABC) is a new activity-based costing model that simplifies costing process by removing necessity of interviewing and polling staff to assign resources costs to activities before assigning them to cost objects (orders, products, customers). The new model assigns resource costs to cost objects directly. In TDABC costing, non- value added activities are recognized. Recognition and deletion of non- value added activities concludes continuous improvement and decrement of product costs (Ilhan et al, 2009). 57

2 2. RESEARCH THEORETICAL FRAMEWORK AND LITERATURE REVIEW 2.1. Traditional costing systems and their failures The most important work of calculation of cost in improvement process is for the third element of production costs, i.e. overhead cost, and assigning it to the products. Using a total and unique rate in calculation of cost deviated calculations (Kaplan & Anderson, 2007b). In activity-based costing, we try to assign overhead expenses to a product that properly reflects its manufacturing cost (Rahnamay Roodposhti, 2009). Rather than inefficiency of traditional systems, development of competition and complexity of technology requires usage of new costing method. Since organizations need proper information of costing for pricing their products and services and for decision-making, obviously, traditional systems are inefficient in this regard (Ibid) Activity-based costing The basic assumption of activity-based costing (ABC) is that products or customers create activities and activities consume resources. Therefore, activities, not products or services, are cause of costs (Abdol Adamu, 2009). ABC is more dominant than the other costing methods because of tracking overhead costs to specific units. It also causes more accurate pricing and costing of products (Raab & Schrok, 2008). Therefore, activity-based costing method can be used to identify and delete those activities that increase costs, without creation of any added value for service-users. By this view, ABC system conduces to decreased costs through deletion of additional and non-profitable activities, and also conduces to finding new economical methods to do activities with added values (Schoute, 2011) Time-driven activity-based costing TDABC model simplifies costing process of ABC through deletion of need of interviewing and polling staff to assign resources to activities, before assigning them to the cost objects (orders, products, customers). This model assigns resources costs to the cost objects directly, and it obeys an accurate framework that only requires to two sets of estimations, which they are simply calculated. First, it calculates resource capacity cost. TDABC model calculates costs of all resources including personnel, supervision, occupancy, equipment, and technology costs supplied to a unit of process. Then, to obtain capacity cost, this model divides this cost by the practical capacity of a department according to the time consumed by staff to fulfill the activities. Second, TDABC uses the capacity cost rate to assign resources cost of a department to its cost objects. This is done by anticipation of resources capacity and assignment of resources cost of a unit to each cost object (Ilhan et al, 2009). TDABC model can simply consider temporal demand changes that are created by types of transactions. Also, managers can easily update this model in order to reflect those changed in their operational conditions. So, mangers are not obliged to frequently interview with staff to add another activity to a department, but it is sufficient they simply estimate time required for each new identified activity. Also, managers can estimate effects of complex orders, in comparison with simple orders, and consider necessary time needed to settle a complex transaction. TDABC models are updated by events, not by time calendar (quarterly or annually). Whenever analysts are informed a considerable change in the costs of the supplied resources or changes of activities, they update capacity cost rate. When they are informed considerable and permanent changes in efficiency of an activity, they decrease time estimation to reflect less necessary time (Kaplan & Anderson, 2007b). 58

3 2.4. Research literature Kaplan & Anderson (2007b) express that main constraints of ABC usage are long time and cost to estimate and examine ABC and preserve the model by repeated interview and examination. ABC models are seldom updated because of their higher updating costs. This causes obsolete drive rates and improper estimations of process, products, and customers prices. In a case study for library services of a university, Kristof et al (2009) used TDABC system. They argued that TDABC improved cost management of library services, so managers would be able to do necessary actions to decrease needed time for customers demands. In a case study, Nathalie et al (2009) studied application of TDABC for five department of a outpatient clinic. The concluded that TDABC provided information related to operation improvement and profitability analysis for different wards of the clinic. Ilhan et al (2009) studied profitability of different groups of customers in a four-star hotel. The results showed that usage of ABC system to calculate cost and profitability of customer groups were deviated. They concluded that the hotel managers can identify unused capacity of different parts of hotel by TDABC and fulfill necessary actions to moderate these capacities. The goal of this research is analyzing profitability of different customer groups (CPA) by TDABC system in Parsian Hotel ( a large Iranian hotel). Thus, after examination of the existing traditional costing system in the hotel, we proceeded to identify the hotel activities and required time for them to calculate time equations. After calculation of final costs and profitability of different customer groups, the results were studied by a group of experts of hospitality industry by Delphi method. 3. RESEARCH METHOD The qualitative method is the most suitable method for case studies. Case studies provide opportunity for a researcher to understand nature of accounting system that is practically used. Since the goal of this research is acquaintance with nature of costing system in hospitality industry and evaluation of TDABC model, thus case study is the most suitable method. Therefore, regarding to subject nature and goal, this is an application research, and regarding profitability analysis of different customer groups by TDABC in Parsian Hotel, the method of this research is case study. In this research, in the first step, weaknesses of the existing traditional costing system were identified. In the second step, literature and theoretical framework were examined. There are rare papers on the topic in service industries especially hospitality industry. Then, by interview with financial and accounting experts and staff of the hotel, processes and activities were identified to calculate cost of different customer groups and determination of their profitability using TDABC model. In the next step, amounts of occurred cost and cleared incomes were identified by examination of (financial & nonfinancial) evidence. By interview with staff of different parts of the hotel, time consumed for different activities was identified. Time equations were estimated and time of each process or activity was multiplied by the practical cost capacity rate to assign costs to different customer groups. Finally, cost and profitability of different customer groups by TDABC and traditional costing system by Delphi were compared by several hospitality experts. Delphi method was designed to maintain proper equality between real views. This method gathers views of experts frequently by questionnaires. Since a few persons respond in this method, Delphi method cannot produce new statistical results (it doesn t intend to do this) person panels are used in most studies. In this research, a 25-person panel was used because of accessibility of respondents. Respondents were generally the managers and staff of Parsian Hotel and the managers of hotels member of Parsian Group. After distribution of the first questionnaire, it is analyzed. In the next step, it is examined if answers are stable or not. If not, answers of the second group are fed. This is repeated until answers are stable (Alizadeh, 2006). 59

4 4. RESEARCH HYPOTHESES Regarding the goal of this study and the research literature, there are two hypotheses: H1: There is a significant difference between cost of different customer groups in TDABC system and that of traditional system in Parsian Hotel. H2: There is a significant difference between profitability of different customer groups in TDABC system and that of traditional system in Parsian Hotel. After offering the proposed model and calculation of profitability capability of different groups according this model, a brief of results was given to the experts to analyze them by Delphi method. 5. THE EXISTING COSTING METHOD OF DIFFERENT CUSTOMER GROUPS AND PROFITABILITY 5.1. Cost allocation in traditional system In the first step, costs are recorded in the cost centers. In Parsian Hotel, all costs are classified in two sections of personnel costs and other costs. The number of staff in each section is used as a basis to allocate the costs in the related cost center. Personnel cost includes all salaries and wages costs. Those general costs that are directly traced to a special cost center, are assigned to the same cost center. For example, telephone bill costs or accommodation costs are allocated upon consumption of each section. Those costs that cannot be directly traced are assigned upon the area or the number of staff in each section. Cost allocation for 2010 is shown in table (1) Cost allocation into customers In this step, costs of main centers (table 2) are allocated by the number of customers in each group. s of Parsian Hotel are classified as follows: Group 1: Permanent customers, mainly from Iranian oil company, which come to reside. Group 2: domestic and foreign customers, which come to Tehran by two Perspolis and AITO 1 tourism agencies for tour. Group 3: Those customers that come to Tehran by tourism agencies other than Perspolis and AITO. These are not fixed but intermittent customers, and they come by previous reservation. Group 4: s who come to Tehran for seminars or tournaments and reside for a while. Group 5: s that are not included in the previous groups and are transitional by previous reservation. Group 6: s that come for celebrations and weddings, seminars, and funerals. They do not reside and leave after the ceremony. To allocate the costs to each customer group, we multiply costs by the number of customer of each group and then divide it to the total hotel customers. For example, to obtain cost of group 1 we have: In above relation, A is the number of customers and B is total number of customers Profitability of customers Table (3) shows profitability of different customer groups in Parsian Hotel. According to this figure, customers of groups 1, 2, and 3 have loss, and customers of groups 4, 5, and 6 are profitable. 6. ALLOCATION OF COSTS UNDER TDABC SYSTEM 6.1. Activities performed in the hotel In this paper, after field studies in Parsian Hotel by managers of different parts and accountants of the hotel, four general activities were identified: 1 Azadi international tourism organization 60

5 1. Front-office or reception: reservation and information, check-in and check-out, meeting and welcoming customers, opening customers accounts, controlling customers spending, accompanying customers when they are leaving, and closing customers accounts 2. Housekeeping: cleaning the rooms, making beds, vacuuming, and replenishing linens 3. Food and beverage: taking orders, preparing kitchen, making breakfast, lunch, dinner, kitchen and restaurant cleaning. 4. Banqueting: providing foods for ceremonies such as weddings, seminars, funerals, etc Time equations TDABC uses time as a main drive of costs, because capacities of most resources like staff and equipment can be measured by time(kaplan and Anderson, 2007a). Key input of TDABC is time of required capacity to do an activity. Therefore, estimation of time needs capability of measurement. Measurements were done by direct observation (time average was calculated during work execution), interview with staff, interview with managers, study of related books and papers, similar time estimations in other hotels Allocation of the costs of front office activities under TDABC Front-office costs include direct and indirect costs (depreciation, staff, etc). In addition, it includes the costs which are allocated from human resource, accounting and finance, and administration cost centers. The costs gathered in the front office cost pool were allocated to the customer segments based on the practical capacity of the receptionists. This approach is also consistent with the TDABC literature (Kaplan and Anderson, 2007b). In fact, time consumed for front-office activities depending on the type of customer coming to the hotel. For example, customers of group 5, which come without previous reservation, occupy more time of staff than customers of group 1, which come with previous reservation. Sum of time consumed for main front-office activities is calculated by summation of subtasks front-office activities (sub-activities). For example, time consumed for customers of group 4 for front-office activities begins with 5.5 min for reservation and 3.5 min for information. Then there is 3 min for welcome and 5 min for deployment. At the end, 4 min for cost control and accompanies the customer as he/she leaves the hotel 3.5 min. According to table (4), total time consumed for a customer of group 4 is 24.5 min. Table (4) shows time consumed by front-office activities for each customer group. Thus, the following equation(2) was obtained by data of table (4) to estimate time required for frontoffice activity: Parsian Hotel has 21 employees in reception department. Each employee works 440 min daily, 6 days a week, and 26 days each month. Therefore, theoretical capacity of front-office activity for year 2010 is min. However, each receptor consumes 80 min daily for rest, etc. Thus, practical capacity for front-office staff during the financial year is min (67%). Cost of each minute of supply capacity is calculated by division of cost of supplied resources by the practical capacity. Thus, it is for front-office activity. Finally, to assign costs according to TDABC, we multiply time consumed for each customer group by the number of customers of that group and divide it by capacity cost rate, and assign accumulated costs in front-office storage to customer groups. According to calculations, about 67% of supplied practical capacity for front-office activity devoted to useful work. Thus, by TDABC, only 67% of total costs of front-office activity were assigned to customer groups. Therefore, total unused cost for supplied resources for front-office activity was 33% Assignment of housekeeping activity costs by TDABC Total costs of housekeeping were assigned to customer groups by practical capacity of the related personnel. Since customers of this group are mostly university students and sport federations, and they dirty their rooms more than the other customers, so housekeeping personnel must devote more time to clean their rooms. Total time consumed for main housekeeping activity is calculated by summation of time consumed for sub main housekeeping activities. For example, before entrance of a customer from group 1, housekeeper controls a room (9 min), cleans a room (11.5 min), and cleans a room during residence of a customer (9 min); and then 13.5 min 61

6 for cleaning after settlement of a customer. According to table 5, a housekeeper devotes 44 min for a customer of group 1. Total housekeeping costs assigned to different groups are shown in table (5). According to table 5, total time required for housekeeping activity is 3,560,107 min. There are 52 personnel in housekeeping department of Parsian Hotel. Legal work time for each employee is 440 min a day, which 80 min is for rest and etc. Therefore, daily capacity of each housekeeper is 360 min. Thus, real supplied capacity of 52 housekeepers is min for a month and min for a year. Total capacity of housekeeping personnel during a financial year is min. This implies that only 81.8% of the supplied capacity is accessible for a year. According to table (5), the following equation(3) was calculated for housekeeping activity: Since customers of group 6 come merely for ceremonies and seminars, and they do not reside in the hotel, so they were not considered Assignment of food activity cost by TDABC Three general activities of breakfast, lunch, and dinner were identified to allocate food costs. Each activity includes several sub-activities. To calculate total food activity time, time for preparing food and drinks and waiting time for eating food by customers were also considered, because the personnel must wait until the end of eating for cleaning. Cleaning sub-activities include cleaning tables and washing dishes. Total time consumed for breakfast sub-activity is shown in table (6), which is 31 for group 1. According to table 6, time equation (4) for breakfast sub-activity is: Since customers of group 6 come merely for ceremonies and seminars, and they do not have breakfast, so they were not considered. According to table (6), total time required for lunch activity is min. Therefore, the following time equation (5) is obtained: Accordingly, time equation(6) for dinner sub-activity is: According to table (6), total time required for dinner sub-activity is min. On the other hand, Parsian Hotel has 58 employees for food department, which work 350 min daily except rest and eating lunch (90 min daily). Therefore, monthly capacity for food activity is min and yearly min, which only 79% of it ( min) is accessible, while required time for food is min, which shows min unused supplied capacity. Thus, according to TDABC, only 78% costs of food storage are assigned to customers, and unassigned cost is Rls ( ) Profitability of different customer groups by TDABC To calculate profitability of different customer groups, we deduce income assigned to each group from cost of that group. Table 8 shows profitability data. According to table 7, all customer groups are profitable except group 2. We see profitability percentage of each customer group in table 7. According to the proposed model, customers of group 1 have a 63% share in profitability of the company, while according to the existing system; these customers are the most losable ones. 7. HYPOTHESES TESTING Delphi method was used to test the hypotheses of this research. To prove a subject in Delphi method, respondents must be experts in that subject. Therefore, the respondents of this research were managers and staff of Parsian Hotel and other member hotels. To test the hypotheses after identifying the problem and definition of the subject, the required experts were identified. After distribution of the first questionnaire, data was analyzed. 62

7 Then it was examined if response of experts were stable. It should be mentioned that this is repeated until stability of the responses (Alizadeh, 2006). The average of good and very good answers was used to calculate significant percentage needed for confirmation of the proposed model. Regarding to the answers and since 95% of individuals accepted the proposed system and evaluated it better than the existing system, and regarding the data of tables 2,7,8 and 9, and deviation of the cost in the existing system, two hypotheses were supported. 8. MANAGERIAL OUTCOMES AND RESULTS OF THE PROPOSED MODEL According to the results, the proposed model lets managers to design an optimized strategy to increase productivity and improve processes. The existing costing system is not suitable to analyze customer profitability. It also ignores cost of unused resources. If, in the next periods, managers can overcome the existing system limitation and implement TDABC system, they must estimate cost of activities and required time for these activities. Consequently, time equations provide this situation for a manager to update the equations without doing repeating and time-consuming interviews. According to the analyses, reception, housekeeping, formalities, and food departments have unused capacities. Obviously, staff of hospitality industry affect on profitability significantly. Thus, the managers must find a suitable strategy to maximize productivity by identification of unused capacities in different department of the hotel. TDABC enables the managers to know about the existing capacities and exploit human resources more and better. Time equations provide the opportunity for managers to identify time needed for fulfillment of activities. Thus, they can distinguish time-consuming activities and can do required measures to minimize needed time for these activities to finally decrease costs of services to the customers. By TDABC, managers encounter a better situation to maximize profit of the company, and they can distinguish profitable and non-profitable customer. According to the results, group 6 is the most profitable one. Thus, management can focus on this group to maximize profitability by changing sale policies and activation of marketing department. Ilhan et al (2009) studied profitability of different customer groups in a 4-star hotel in Turkey. Their results showed that usage of ABC system to calculate costs and profitability of different customer group was deviated. Also, they showed that profitability of different customer groups by TDABC is more proper than traditional costing systems, which is consistent with the finding of the current research. It seems that usage of TDABC is limited. However, its usage is welcomed by service and productive companies. 9. RECOMMENDATIONS FOR FUTURE RESEARCH The subjects that can be studied are: Implementation of TDABC system in similar companies and analyzing the results for decisions of user of accounting information Implementation of TDABC system in similar hotels and identification of more activities to obtain more accurate and more updated time equations Applying TDABC system in companies that use Enterprise Resources Programming systems (ERP) REFERENCES Adamu, Abdul (2010), The practicability of activity-based costing system in hospitality industry, Journal of Accounting, Nasarawa State University, vol.20 no.14, pp Alizadeh, Abdol-reza (2006), Analysis by Delphi,Yusuf, Tehran, (published in Persian). Annaraud, Katerina; Raab, Carolu; and Schrok, Jay (2008), The application of activity-based costing, A quick service restaurant, Journal of Food Service Business, vol.11,no.1, pp Deol, Prakash (2009), Cost allocation in a service industry, Journal of Business and Economics, vol.18, no.2, pp Dorota, Kuchta; Troska, Michal (2007), Activity-based costing and customer profitability, Journal of Cost Management, vol.23, no.4, pp

8 Fayazi, Amir (2008), Applying ABC system model in Sarcheshmeh Copper Complex, Thesis for master degree in accounting, Faculty of Management and Accounting, Islamic Azad University, Central Tehran Branch. Hosseinpur, Mas ud (2006), Movement of decrement of costs, Thesis for master degree in accounting, Faculty of Management & Accounting, Islamic Azad University, Ahwaz Branch. Ilhan, Dalci Veyis; Tanis, Levent Kosan (2009), profitability analysis with time-driven activity-based costing: a case study in a hotel, International Journal of Contemporary Hospitality Management, vol.22, no.5, pp Kaplan, R.; Anderson, S.R. (2004), Time-driven activity-based costing, Harvard Business Review, vol. 82, no.11, pp Kaplan, R.; Anderson, S.R. (2007a), The innovation of time-driven activity-based costing, Journal of Cost Management, vol.21, no.2, pp Kaplan, R.; Anderson, S.R. (2007b), Time-driven activity-based costing a simple & more powerful path to higher profits, Harvard Business School Press, Boston, MA. Kristof.S; Michael S.; Anne R.; Fillip R. (2010), Time-driven activity-based costing acquisition process: a case study in Belgin University, Library collection acquisition and technical services, vol.34, year 2010, pp Nathalie D.; Kristof S.; Fillip R. (2009), Time-driven activity-based costing in an outpatient clinic environment: Development, relevance and managerial impact, Journal of Health Policy, vol.92, pp Odysseas, p.; Loannis, p. (2009), Management accounting practices in Greek hospitality industry, Journal of Managerial Auditing, vol.44, no.12, pp Odysseas, p. (2007), Cost accounting in Greek hotel enterprises, Journal of tourism, vol.18, no.14, pp Oliver Villarmois; Yves Levant, (2009), Simplified customer profitability evaluation: The equivalence-based method, Journal of Cost Management, vol.23, no.28, pp Paolo, Collini (2007), Cost analysis in hotel industry, Journal of Accounting and Financial Management, vol.18, no.11, pp Pernot, E.; Roodhooft, F.;Abbeele, V.A. (2007), Time-driven activity-based costing forinter-library services: A case study in a university,the Journal of Academic Librarianship,vol.33,no.5,pp Raab, C.; Mayer, K. (2003), Exploring the use of activity-based costing in restaurant industry, International Journal of Hospitality & Tourism Administration, vol.4, no.2, pp Raab, C., Mayer, K., Ramdeen, C.; Ng, S. (2005), The application of activity-based costing in a Hong Kong buffet restaurant, International Journal of Hospitality & Tourism Administration, vol.6, no.3, pp Rahnamay Roodposhti, Fereydoon (2009), Activity-based costing and management, Tehran, Iran (published in Persian). Schoute, M. (2011), The relationship between product diversity, usage of advanced manufacturing Technologies and activity-based costing adoption, The British Accounting Review, vol.10, no.10, pp TABLE(s) Table (1) cost allocation between the major cost centers based on traditional methods Cost centers Personnel costs Material Other expenses Non-operation expenses direct personnel expenses Common expenses Other direct cost Common expenses Rooms 11,922,649,792 6,920,899, ,349,895,234 2,668,895, ,658,928 32,676,998,878 Food and beverage 14,432,725, ,209,738 6,537,565,516 2,387,905, ,073,907 2,089,123,707 26,843,604,023 Landry 72,931, ,157, ,614, ,703,660 Communication 385,728, , ,882, ,779,997 administrative 4,894,965, ,012, ,677,352, ,198,674 1,698,063,731 9,404,592,294 Total 31,709,000,532 8,440,121,730 6,537,565,516 14,429,479,691 3,680,167,687 5,287,343,696 70,083,678,852 40,149,122,262 6,537,565,516 18,109,647,378 5,287,343,696 70,083,678,852 total 64

9 groups Quantity Table (2) allocation cost between customer groups in 2010 Cost pool Cost pool food Cost pool Cost pool room and beverage Landry communication Cost pool administrative Total cost allocated Group 1 48,211 20,432,819,197 12,869,884, ,704, ,691,851 4,508,933,233 38,536,033,102 Group 2 5,443 2,306,856,006 1,453,004,134 33,159,064 48,624, ,056,514 4,350,700,632 Group 3 4,973 2,107,660,282 1,327,538,041 30,295,798 44,426, ,099,769 3,975,020,070 Group 4 10,876 4,609,473,805 2,903,338,777 66,257,208 97,160,494 1,017,177,778 8,693,408,061 Group 5 7,598 3,220,189,589 2,028,279,517 67,876, ,602,865 6,073,235,973 Group 6 23, ,261,558, ,193,722,136 8,455,281,013 Total 100,557 32,676,998,878 26,843,604, ,703, ,779,997 9,404,592,294 70,083,678,852 Table (3) profitability customer groups under traditional system in 2010 title Group 1 Group 2 Group 3 Group 4 Group 5 Group 6 total revenue 36,209,149,665 2,945,925,485 3,531,906,186 9,522,865,270 7,354,703,366 8,792,680,691 68,357,230,663 expense 38,536,033,102 4,350,700,632 3,975,020,070 8,693,408,061 6,073,235,973 8,455,281,013 70,083,678,852 Profit(loss) -2,326,883,438-1,404,775, ,113, ,457,209 1,281,467, ,399,678-1,726,448,189 Table (4) cost of front office activities allocated under TDABC customer Reservation Information Welcoming Check-in and Opening customer Account Controlling and closing account Check-out and accompanying Total unit time Activity quantity Total minute Rate (RIL/min) Allocated cost Group , , ,214,896,323 Group , , ,177,140 Group , , ,573,776 Group , , ,601,261,704 Group , , ,187,133,802 Group ,456 11, ,477,581 Total ,557 1,556, ,355,520,325 Controlling rooms before check-in Cleaning rooms before check-in Table (5) cost of housekeeping activities allocated under TDABC Cleaning rooms during customer stay )minute) cleaning rooms after the customer leave hotel Total unit time Activity quantity Total minute Rate (RIL/min) Allocated cost Group ,211 2,121, ,107,471,358 Group , , ,141,444 Group , , ,465,468 Group , , ,077,114,113 Group , , ,120,129,584 Total ,101 3,560, ,928,321,965 65

10 Table (6) cost of food and beverage activities allocated under TDABC Time sent on breakfast Time spent on launch Time spent on dinner Total minute Rate (RIL/min) Allocated cost Group 1 1,542, , ,832 2,576, ,740,833,170 Group 2 168, , , , ,068,720,775 Group 3 169, , , , ,054,269,366 Group 4 407, , , , ,481,718,557 Group 5 250, , , , ,125,557,970 Group 6 107, , , ,141,050,614 Total 2,539,151 1,106,817 1,315,703 4,961, ,612,150,452 Time spent on serving breakfast welcoming and taking orders Preparing orders and serving Time to eating food Cleaning Total unit time Activity quantity Total minute Group ,211 1,542,752 Group , ,733 Group , ,082 Group , ,850 Group , ,734 Total ,101 2,539,151 Time spent on serving launch Group , ,648 Group , ,340 Group , ,680 Group , ,010 Group , ,114 Group , ,025 Total ,231 1,106,817 Time spent on serving dinner Group , ,832 Group , ,856 Group , ,997 Group , ,116 Group , ,553 Group , ,350 Total ,227 1,315,703 66

11 Table (7) profitability of different customer groups under TDABC - Group 1 Group 2 Group 3 Group 4 Group 5 Group 6 total Revenue 36,209,149,665 2,945,925,485 3,531,906,186 9,522,865,270 7,354,703,366 8,792,680,691 68,357,230,663 Expense 24,063,200,850 3,580,039,359 3,448,308,610 7,160,094,373 4,432,821,356 7,732,970,391 50,417,434,938 Profit(loss) 12,145,948, ,113,874 83,597,576 2,362,770,897 2,921,882,010 1,059,710,300 17,939,795,725 The profitability under TDABC The profitability under traditional costing system 63% -03% 04% 12% 15% 55% - -35% -21% -07% 12% 19% 05% - Table (8) result from respondents on the first hypothesis question Traditional system TDABC poor middle good excellent average groups Group 1 38,536,033,102 24,063,200, Group 2 4,350,700,632 3,580,039, Group 3 3,975,020,070 3,448,308, Group 4 8,693,408,061 7,160,094, Group 5 6,073,235,973 4,432,821, Group 6 8,455,281,013 7,732,970, Table (9) result from respondents on the second hypothesis question groups Traditional system TDABC poor middle good excellent average -2,326,883,438 12,145,948, Group 2-1,404,775, ,113, Group 3-443,113,884 83,597, Group 4 829,457,209 2,362,770, Group 5 1,281,467,393 2,921,882, Group 6 337,399,678 1,059,710,