Application of costing for activities in Cuban hotels

Application of costing for activities in Cuban hotels

1. Introduction

The present investigation began to be carried out in March 1999, motivated by multiple factors, among them the criticisms made in the current literature of traditional costing methods for their inability to adapt to the changes in the business world at the end of the century, characterized by global competition and technological innovations, which have led to surprising innovations in the use of financial and non-financial information in companies. This new environment requires more accurate information on costs and how to proceed in terms of activities, processes, products, services and customers of the organization.

Our concerns about the topic were increased by several works presented at the International Accounting Event 99 on ABC (Activity-Based Costing) and the article entitled "Cost Systems in Cuba We must catch up" by Dr. Martha Armenteros Díaz, President of the Cuban Cost Society. In this article, in addition to the suggestiveness of the title, it is categorically stated that the cost systems used in Cuba do not respond to the demands of the current competitive environment.

In this area, today it continues to be a problem to be solved by professionals linked to Economic Sciences throughout the world, reaching minimum cost levels in the manufacture of products or in the provision of services that ensure adequate levels of benefit, the required quality. in the articles and a level of consumption of material, human and financial resources that correspond to the existing technology and degree of development. In Cuba, this problem is not an exception and during all the years that have passed since the revolutionary process it has manifested itself. In all the Congresses of the Communist Party of Cuba, the problem of economic efficiency, and in particular the decrease in production costs, has continued to be addressed,both in the governing documents and in the Economic Development Guidelines of the different five-year periods; even, from the special period, the importance of this theme becomes more evident in accordance with the conditions in which the country has to maintain the conquests of Socialism.

In the Economic Resolution of the V Congress it is proposed… ”Efficiency is, therefore, the central objective of Economic Policy since it constitutes one of the greatest potentials that the country has. Making better use of resources, raising labor productivity, achieving better results with less costs will have a positive effect on our financial balance, facilitating participation in international trade and access to capital markets and investments. ”

Our practical experience in economic activity has allowed us to observe that the current costing methods and existing cost systems are not sufficient to attack the growth of expenses (mainly indirect ones), which motivates us to seek new methods of controlling costs that allow us to achieve the desired levels of efficiency. This constitutes the central problem that this investigation occupies.

To clarify, it is important to set out here the assumptions of the author of this research, the first is that this work starts from recognizing that the costing method is not only identified with activity-based costing, but that it is part of a set of existing costing methods. A classification of these according to the part of the costs that are attributed to the products, according to Amat Oriol and Soldevila Pilar is as follows:

-Partial Cost Systems: including the direct cost system, evolved direct costs, variable costs, evolved variable costs. On the other hand, there are the Complete Cost Systems, the best known being the following: Section cost systems and Activity based cost systems.

However, due to the importance that has been given in the accounting literature to the activity-based costing method, this research places attention on this topic. The second assumption is that the more general conception of the cost of production is not abandoned as the monetary expression of the material, human and financial resources used to obtain a product or service, and that they must be recovered with the sale of the finished production. and / or for the income obtained from the provision of services.

The state of the debate on the subject of our study indicates the existence of a sharp controversy between two sides, on the one hand the defenders of traditional costing methods and detractors of ABC and on the other hand the defenders of ABC.

The costing systems respond to the needs of the users regarding the information of the concrete and real processes of the production units. In other words, there is necessarily a relationship

COASTING TECHNIQUE <> Organizational Reference Context

The judgments on the validity of any costing technique, to be objective, must be the result of an analysis that has respected this “technical-context” relationship.

In other words, a correct technique, conceptually designed for "context A", will necessarily fail if used in "context B". However, the cause of its failure does not respond to the fact that it is a wrong technique, but rather that it is applied in the wrong context (for which it was not created).

Based on the foregoing, in our opinion, the controversy between the defenders of Activity-Based Costing and the defenders of "traditional techniques" is unnecessarily prolonged in our opinion, largely due to this lack of observation of the "technical-context" relationship.

The start of the disclosure that activity-based costing currently has is due to the Johnson & Kaplan book »Relevant Losses: Emergence and Failures of the Accounting Administration» published in 1987. When analyzing the changes that were taking place in the process Production and marketing due to the new programming and control techniques that were being put into practice, facilitate the search for new techniques for determining and analyzing costs in tune with the new environment in which businesses develop.

Another work of great importance on this subject is undoubtedly "Cost and Effect", written in 1988 by those who are considered by many, the creators of ABC-ABM (Robert S. Kaplan and Robin Cooper).

In addition to those mentioned above, many other authors have written on the subject, which are related as part of the Bibliography used to prepare this work.

Currently in the hotel industry the SUCH (Uniform Accounting System for Hotels) recommends the direct costing method, but an additional possibility of the cost structure according to the SUCH is formed by obtaining the "Total Cost" in the operating departments, by transferring the proportions assigned to them of non-operating expenses and fixed charges and which constitute indirect expenses of the operating departments. Although it should always be remembered that the distribution of indirect expenses is based on generally arbitrary or estimated bases that may produce some distortions in the results. For these reasons, the allocation or distribution of indirect expenses to the operating departments should be an additional procedure to the established method and should be used only for:Evaluate or establish new service charge rates and serve as the basis for strategic planning.

The importance of studying this topic (ABC costing method), lies in the fact that our country needs its companies to update and put into practice the latest in the calculation, control and analysis of existing costs in the world, to be able to successfully enter the increasingly turbulent and competitive international market.

Cost control within the Cuban hotel activity has been perfected in recent years, although all the cost control tools that may be effective for management have not yet been fully exploited. That is why this work aims to contribute a small grain of sand to this improvement process.

Based on the problems raised, this work pursues the central objective: to offer an analysis of costing based on activities (ABC), so that this allows demonstrating the need and possibility of its application in the Cuban hotel company, through the proposal of a methodological design that facilitates implementation.

In correspondence with the central objective, the following specific objectives have been defined:

- Synthesize and systematize the theoretical framework of activity-based costing.

- Characterize the main costing methods used in business and specifically in hospitality.

- Analysis of the possibility of applying activity-based costing in the Cuban hotel company.

- Proposal of a methodology that facilitates the use of costing based on activities in Cuban hotels.

The research hypothesis is: activity-based costing is a contemporary experience that contributes to raising the competitive capacity of business management, which could be used in the Cuban hotel company.

In accordance with the objectives outlined, the object of study of this research fell to the analysis of the possibility of applying new economic tools for cost control in the hotel company, taking as a basis for its research the "Carisol Hotel Complex - Los Corales »located in the Baconao Park, Santiago de Cuba province.

The novelty of this work could therefore be in the following results: Firstly, to provide a study that synthesizes and systematizes the theoretical and conceptual debate on ABC, secondly, to provide a study that summarizes the general and economic and financial characteristics of the hotel industry, the objectives, characteristics and basic conceptual aspects of the SUCH, with emphasis on the analysis of the costing methods recommended by this system, specifying the main advantages and limitations of its application and thirdly proposing a methodology that serves as a guide for managers and specialists from hotel companies that decide to implement this novel costing technique.

This study could be the object of diverse applications, among them, that of a teaching nature, it can also be a modest contribution to the introduction of the subject in Cuban business practice.

The bibliography used, in fact the main obstacle to carrying out this research, were mainly publications on the subject in specialized magazines and short chapters on the subject in some cost accounting books.

In this work, the theoretical principles and foundations of the research method of Marxist-Leninist political economy were used, starting from the use of the universal method of knowledge, which together with the logical approach, allowed to deepen the processes, their unity and differences, as well as offering the possibility of analyzing the contradictions inherent in the phenomenon under study, which in turn constitutes its source of development. According to this and in correspondence with the materialist dialectic, this research proposes the following structure:

A set of Accounting, Analysis and Systems Design procedures was used, as well as computational techniques to solve some of the problems posed. Empirical - practical methods were used such as: bibliographic reviews, interviews, questionnaires, document consultations, direct observations, as well as group creative techniques and practical experimental applications, theoretical methods, such as analysis and synthesis, induction, deduction and hypotheses.

2. Need and possibility of implementing the ABC in the Cuban hotel industry.

As the hotel industry is a service company, it may be more receptive to the application of the new cost systems, since many of the traditional ones dedicate a large part of their effort to the valuation of inventories, a situation that, given the intangibility of the service, it does not proceed in the hotel company. We should also bear in mind that although technological advancement replaces human capital, in this sector the impact is not so strong, since human presence is essential for the provision of the service, which evidences the need for adequate personnel management that allow adequate control of the activities carried out by the employees of the different departments and the time they spend performing each of the tasks,This issue is possible without much effort due to the implementation and development of automated systems for controlling hotel management.

Hotel companies are characterized by the large volume of indirect costs, which represent approximately 55% of total costs. Among these indirect costs, fixed costs stand out, motivated, among other reasons, by the fact that a hotel needs a strong investment in fixed assets, which brings with it high expenses for depreciation. In addition to depreciation, other expenses behave as indirect and fixed, such as a large part of personnel expenses, security expenses, installation maintenance, insurance, advertising and promotion, and administration expenses.

It is worth highlighting the trend of indirect cost growth observed in hospitality, mainly motivated, among other reasons, by the increasingly competitive environment in which this type of company is forced to operate, which causes high costs. advertising and promotion essential to stay in the tourist market, in addition to the high degree of automation that is gradually being introduced in all areas and the need to constantly invest in new equipment and furniture for rooms, gastronomic areas and areas public.

On the other hand, one cannot fail to mention the obsolete and arbitrary methods of control and distribution of indirect expenses currently used in most hotel chains. It should be noted that the SUCH establishes the direct method of costing to be used, which we consider does not respond to the characteristics of the environment in which this type of company operates, in addition to not providing any information on indirect costs and their influence in the total cost of hotel services.

Notwithstanding an additional possibility of the cost structure according to the Uniform System is formed by obtaining the “Total Cost” in the operating departments by transferring to them the proportions assigned to them of non-operating expenses and fixed charges and which constitute indirect expenses of operating departments.

Profits in operations of income-producing areas, such as accommodation, gastronomic services, shops, etc. they must be considered as profits (or losses) before undistributed indirect expenses. Only by adding a portion of the indirect costs can the total costs and net results of each area be obtained. Although it should always be remembered that the distribution of indirect expenses is based on generally arbitrary or estimated bases that may produce some distortions in the results. For these reasons, the allocation or distribution of indirect expenses to the operating departments should be an additional procedure to the established method and should be used only to: Evaluate or establish new service collection rates and Serve as a basis for strategic planning.

Due to what has been previously stated, the author considers it necessary and possible to implement this technique in the hotel company. The ABC, in addition to overcoming the limitations posed by traditional costing methods regarding the distribution of indirect expenses, gives the possibility of managing them, making possible their reduction and control.

Cost control is essential for good management, and administrators are interested in knowing the actual operating costs incurred in the different cost centers and, more importantly, determining the costs of the activities carried out in the company. Properly managing the costs of the company's activities today represents a key strategy to achieve a competitive advantage in highly turbulent and competitive markets, since what the customer pays and must perceive is the addition of value. Then, then, the activities that provide support to the production cost centers must be adequate, within the value chain, otherwise the way to move these activities to external providers must be seen.

The implementation of the ABC is of particular importance for the Cuban hotel activity, placing the framework of action in one of the most burning problems that the country is experiencing, which is reducing costs and gaining competitiveness in the framework of tourism activity, named as the heart of the Cuban economy.

The activity-based costing method is one of the newest business management tools in the contemporary world, and is aimed at raising the levels of efficiency and competitiveness of business activity. This technique as a form of social organization allows business improvement, and as such, it could be applied in Cuban hotel management, always observing the particularities that institutions identify.

According to an existing methodology, the potential benefits of ABC can be analyzed in advance in two different dimensions:

- The first is based on the probability that, in a given application, ABC will produce costs or other results that are significantly different from those that could be obtained with more conventional or less expensive methods.

- The second dimension of the model seeks to establish, taking into account that the cost information produced by the ABC is really different, the management will use it to make important decisions. Managers should consider that the information provided by ABC is qualitatively superior and the nature of the organization and its competitive, legal and social environments should allow managers to use this information freely.

The factors involved in the first dimension are:

a) The number and diversity of the products or services produced.

b) The diversity and differential degree of support services used for the different products and / or services.

c) The extent to which common processes or sets of these are used.

d) The effectiveness of current cost allocation methods.

e) Growth ratio of periodic costs.

The factors involved in the second dimension are:

a) Freedom of management to set prices.

b) The ratio of periodic costs to total costs

c) Strategic considerations.

d) The climate and culture of cost reduction in the company.

e) Both real and desired frequency, routine or special, of the cost analysis of products and / or services.

This methodology is based on the analysis that the company makes of itself. It consists of the weight and combination of the weights of the factors and dimensions mentioned above, in order to assess the probability of success in the implementation of the ABC. The weighted and combined scores translate as a point to one of the four quadrants of a graph. Meanings are added to the quadrant and to the final punctuation place for that quadrant. The methodology is not designed to give rise to a number on the coefficient scale that indicates the relative advantages of ABC, but rather to structure a systematic analysis whereby the managers of a company can discuss common factors that support or discourage implementation.

3. Steps to follow to implement the ABC in a Hotel Facility.

After having studied the way ABC is applied in the world, according to the bibliography reviewed, and analyzing the characteristics of hotel facilities, the author set out to design a methodology that is adapted to the characteristics of the environment. in which they operate and to provide a guide that serves as support to managers and specialists who decide to implement this novel technique. The proposed methodology consists of four fundamental phases.

I. Preparatory.

II. Activity Cost Calculation

III. Costing of Products and / or Services

IV. Analysis of Results and Adjustment

3.1 Phase I Preparatory.

To design a cost system it is necessary to have a well-conceived idea of ​​the type of company for which it is designed. It is necessary to be able to identify the processes that are carried out and, in accordance with the theory of costs, propose the instruments that allow identifying and recording the components of cost.

To implement a system as complex as ABC requires a prior process that allows defining the bases on which it will be implemented and creating the necessary conditions to easily locate all the necessary statistical, economic and financial information. Taking into account the aforementioned, we define, according to our point of view, the organizational premises necessary to implement the ABC in our hotels.

1- Selection and configuration of the data or quantitative inputs to be integrated in the calculation of the cost of the activities.

To carry out the aforementioned process, it will be necessary to: a) Define the cost valuation technique to be applied, b) Determine the time horizon of costs c) Define the life cycle of activities.

Taking into account the organizational conditions and objective possibilities of each hotel facility, the techniques for evaluating the costs of the products and services that can be applied are: techniques based on the use of real costs and techniques based on the use of predetermined costs.. The techniques based on real costs presuppose the recording of expenses and the calculation of costs taking into account existing historical data; This technique has limitations since it is not possible to make comparisons due to not having an adequate normative base. On the other hand, the predetermined costs are those that are calculated before producing a good or providing a service and, depending on the bases used for its calculation, are divided into estimated costs and standard costs.The estimated cost indicates what a product or service could cost with a relative degree of approximation, in the absence of regulations that make it possible to calculate it more rigorously. The standard cost presupposes the use of a rigorous normative base, a reliability and accuracy in the data used for its calculation and measurement parameters that allow determining the origin of the deviations.

In the specific case of the hotel, taking into account the state of the aforementioned factors and in order not to further complicate the initial process, the technique that seems to us to be the most suitable is that of adjusted real costs, later the system could be improved using one of the variants of predetermined costs.

Once the cost valuation technique to be used has been chosen, a series of tasks must be performed in relation to the cost elements, such as: Relate them to the level of activity, Identify separately the cost components that do not provide added value, and Add the data at the process level, in order to know their global cost and to be able to identify the activity units.

Regarding the determination of the time horizon, it should be noted that the stability of the data is of great importance. Please note that monthly expenses are very sensitive to short term changes or fluctuations; meanwhile, the annual data is more stable, as it does not incorporate possible random fluctuations in the company's environment.

An adequate delimitation of activities and their costs, in terms of the life cycle, is essential in an ABC system, the life cycle begins with the identification of consumer needs and extends through planning, research, design, development, production, evaluation, logistics, withdrawal and disappearance from the market.

At this stage, the following principles included in the general bases of business improvement must also be taken into account, they are these: the fact that costs must not be charged before they have occurred, the application of costs requires that consumption necessary is true, although its degree of completion is not perfectly determined; and the elements to consider in cost must refer to the calculation period.

2- Determine which expenses will be part of the cost calculation of the products and services and which should be considered expenses of the period.

We consider this phase of great importance to obtain as real as possible the costs of the products and services offered by the hotel, since it defines which items of expenses are going to be part of the costs and which are not. For this, the author relies on the general guidelines for the planning and determination of the production cost issued by the MFP, especially in the point in which the expenses that should not be included in the cost are addressed.

In the calculation of the cost, all expenses related to the use of tangible fixed assets, raw materials, materials, fuels, energy, wages, social security and other ordinary and own monetary expenses of the operation of the hotel will be included, including, of course, in addition to those incurred in the process of providing services and preparing the products it offers, the costs of indirect activities and activities that support both basic services and indirect activities.

The expenses that will not be included in the calculation of the cost are those that the author considers as extraordinary expenses among which are: Financial Expenses (Losses in Currency Exchange, Interest, Arrears and Fines, Bad Accounts), Expenses of previous years, Shortages and Losses, Own investment expenses, Natural disaster expenses, in accordance with current provisions and expenses related to the prevention and settlement of the consequences thereof.

According to some authors, some fixed expenses such as depreciation, insurance, rentals and others should not be charged at the cost of the products and services offered by the hotel. The author does not agree with this criterion since these expenses are typical of the operation of a hotel and are incurred for the proper functioning of the services provided. These costs can be considered as general and distributed to the products or services as if it were an activity, with a distribution base as added value or total direct costs. Another variant, in my opinion, the most appropriate is to consider these expenses as a grouping of costs and to distribute the costs to the others on the basis of their use of the productive space.

In addition, it must be taken into account that the hotel industry works with somewhat reduced profit margins, so to make strategic decisions such as determining the minimum prices at which the hotel should be sold in order not to operate at a loss, it is necessary that the cost calculation It is done taking into account all the ordinary expenses that are incurred, since failing to consider some, would result in the commercial area selling the hotel at a price that would not guarantee at least operating at the equilibrium point and therefore the result. of the hotel operation will be negative.

3- Define the treatment of the sub-activity expenses and the super-activity benefits, their influence on the pricing.

It is quite frequent that in hotels the available residential capacity that is considered adequate is not fully used. This available housing capacity does not refer to the maximum capacity, but to the one desired and can be reached with a high probability. The cost of subactivity refers precisely to the loss caused by the underutilization of this capacity. By contrast, superactivity benefits refer to the opposite situation. That is, when the capacity used is greater than the available capacity.

The cost derived from excess capacity is an aspect that has to be considered as substantive in an ABC system. If not all of the productive capacity is used, only the part of the capacity that is currently being used will have to be charged to the cost targets; the remaining amount is to be considered as period expenses, or specifically a cost of unused capacity.

On the most appropriate way to deal with this problem, we can consider one of the ABC variants proposed by Yang and Wu. On the proposal of Yang and Wu, I agree with what was expressed by Rubio Misas: Thus, simple ABC may be adequate as an efficiency measure, but inappropriate for pricing because it does not discriminate costs corresponding to unused capacity, so it can cause strong distortions in unit costs if there is a considerable volume in fixed costs; ABC capacity, determined assuming full capacity utilization, is considered incorrect for pricing because it is overly optimistic, since rarely can a facility function 100% at all times; while the strategic ABC,Based on the level of occupancy that the company targets during its planning horizon, it can be especially useful for pricing because of its approach to true long-term costs. Therefore, it would be especially appropriate to apply this last variant of ABC to the hotel company, since it is in line with the characteristics of temporality presented by the services it offers.

The fundamental equation of the activity based cost system is:

Cost of Cost of Benefit Cost

Resources = Resources + Capacity - of Supplied Used not used Superactivity

The calculation of capacity costs is made from fixed costs, which are precisely those that determine the capacity of a company, section or activity. The following process is followed to calculate the capacity costs:

- The part of the fixed costs is separated from that of the variable costs of each activity.

- The total fixed cost of the activity is divided by the number of activity units. In this way, the fixed cost of each activity unit is obtained, according to the available capacity.

- The costs that are attributed to the products are those of the activity units that they consume, valued as explained above.

- If fewer activity units work in the activities than are available, there is a part of the cost of the activity that will be pending to be attributed to the cost objective, this is the cost of subactivity which, as explained above, is not attributed to the product.

- If the activity works more activity units than the available one, there is an excess of costs of the activity that has been attributed to the cost objectives. To correct this, this excess cost, which is called superactivity benefit, is imputed as less costs for the period.

These costs or benefits related to the use of capacity are not included as product or service costs because the responsibility for them goes beyond the section or activity in which they occurred. In fact, in many cases they are the responsibilities of the company's senior management for building a hotel with a certain capacity without prior market research; or the marketing department, for getting fewer customers than the hotel can serve.

4- Define cost objectives.

In any information system, a series of steps or stages must be followed to obtain an informative output that is in accordance with the purpose assigned to said information; that is why the process of preparing the information will be conditioned by the objective of the information. In an ABC system, as in any other information system, the cost allocation process must be carried out whenever the cost objective has been predefined, a concept that implies; everything for which an independent measurement of its costs is required. This is to say that if users of accounting information need to know the cost of something, that something is a cost objective. So,the cost objective can range from a product or service to a singular unit or component of said product or service; but also, it can be market-oriented by evaluating the maintenance costs of a client, market segment, distribution channel, etc.

Therefore, the costs assigned to the cost objectives will depend on the activities that the cost objectives have consumed, and the map of activities must be configured, from which the activities can be more precisely known. quantities of each activity consumed by the cost objective.

In our specific case we are interested in knowing the costs of the products and services offered by the hotel, therefore the cost objectives as stated above are the following:

a) Accommodation Services

b) Telephone Service

c) Food Services (Restaurant, Cafeterias and Similar)

d) Beverage Services (Bars, Disco and Similar)

e) Animation and Recreation Services.

It is valid to clarify that the cost objectives may vary from one hotel facility to another depending on the specific characteristics of each one of them, among which its modality, star count, number of rooms, pension regime, ect.

5- Define whether the application of the ABC will be made using areas of responsibility or Cost Groups, in addition to making the corresponding adjustments in each case.

This step we consider of great importance, then; In a first phase, the distribution of expenses following an ABC model can follow two alternative routes:

a) The allocation of costs begins with the location of costs in the sections or areas of responsibility, and then the costs of the sections are distributed among the activities carried out by each section or area of ​​responsibility.

b) Indirect costs are directly attributed to the cost groups corresponding to the activities, previously defined.

As explained above, all hotel facilities are governed by the rules and regulations contained in the SUCH, in addition to the particular adaptations that each country and each hotel chain make to the system, with the aim of responding to the information needs of the higher level in each specific case. Therefore, the vast majority of hotel chains have designed their own hotel management systems (automated in most cases) and within this, of course, accounting, accounting systems that are designed in their majority to give response to external information needs; However,The automated accounting systems used in the hotel industry are designed to issue the lists of income and expenses by area of ​​responsibility (income statement by area of ​​responsibility).

Also keep in mind that accounting and cost control by area of ​​responsibility is a very valuable tool to measure the results that each part of the company is obtaining, which is why it is one of the most widespread techniques within companies. hotel, in addition to being recommended by SUCH and the general guidelines for planning and determining the cost of production in Cuba. Also, if the information provided by the ABC system based on a departmental structure is analyzed, it is observed that the two cost structures are maintained: on the one hand, the information related to the activities is available, and on the other, the cost data is maintained. by departments;This makes it easier to obtain additional data sets regarding the procedure by which cost groupings are used.

Below we show a summary table with the most important differences of both variants.

From the costs according to their nature From the reports of the cost centers

- You need to have basic data as a starting point, the precision of costs by areas of responsibility not being relevant.

- It is easier to have a complete control of the included and excluded costs.

- It is easier to assign costs to activities by avoiding costs that affect more than one department.

- It is easier for the managers of the departments involved to use the cost reports as a starting point.

- It is usually less laborious to start the analysis of activities from the cost centers.

- It constitutes a more adequate starting point if only some parts or areas of the company are taken into account.

Based on the foregoing, we consider that the most appropriate and least expensive variant for the implementation of ABC in our facilities is through the use of the information provided by the statements of income and expenses by areas of responsibility.

6- Identification and classification of the areas of responsibility in Direct, Indirect and Support.

Now, once it has been defined that the areas of responsibility will be used for the application of the ABC, it is necessary to analyze if the existing ones are designed in such a way that they respond and facilitate the information needs of the ABC, and make the possible changes in necessary cases.

An example of the above is observed in the fact that hotel facilities generally have a single area of ​​responsibility commonly called the Administration Department to record the expenses of all administrative areas such as: General Management, Accounting, Risk, Personnel, Security, Computer Systems, etc. Our position in this regard is that although, first of all, the volume of these expenses must be assessed before deciding to separate it by areas of responsibility, the fact that they are all grouped into a single cost center does not give the possibility of clearly defining costs. of the activities carried out by each area of ​​responsibility without seeking additional information, which in fact would make the process more expensive,in addition to making it impossible to control the results of each department or administrative section.

It should be noted that there are areas of responsibility, cost centers or activities that do not correspond to the operation of the hotels, but that if they add value to the product, are activities managed by collaborators such as car rentals, options, stores, diving, etc. These activities will not intervene in the ABC model that we propose.

In the proposed model, three types of areas of responsibility are distinguished according to their relationship with the products or services offered by the hotel:

- Direct Areas that are those whose main objective is the provision of services to clients.

- Support or Internal Services Areas are the areas whose main function is to provide services to the direct areas or basic services of the hotel and also to a lesser extent to the indirect areas.

- Indirect Areas, are fundamentally the administrative areas whose main function is Marketing, Administration, Management and Control of the operation of the hotel.

In the case of hospitality, which is classified as a service company, it is considered that the classification we propose is more adapted to the characteristics of this type of company and more clearly reflects the interrelation of cost objectives with the different areas of responsibility or sections of a hotel.

The areas of responsibility that the complex has are the following

DIRECT DEPARTMENTS (OF CUSTOMER SERVICES)

accommodation

Reception

Housekeeper

Customer Phones

Laundry and dry cleaner

Gastronomy

Buffet restaurant

Sailor Restaurant

Lobby Bar

Pool Bar

Beach Bar

Discotheque

Animation and Recreation

SUPPORT DEPARTMENTS (OF INTERNAL SERVICES).

Maintenance and Gardening

Hygiene and Cleaning Brigade

Shopping and Warehouses

Employee Dining Room

Administrative Phones

Protection and security

Information systems

Human Resources

INDIRECT DEPARTMENTS

General Management

Risk, Promotion and Sales

Accounting

It is appropriate to clarify our conviction that the classification of areas of responsibility is not really important if you want to apply an ABC system, which as we have analyzed focuses on activities. However, starting from the classification of the areas of responsibility to later classify the activities I consider contributes clarity to the process, we must bear in mind that in general the activities carried out by each area of ​​responsibility are homogeneous, so the classification of most of the The activities of each area of ​​responsibility coincide with the classification of the latter.

7- Analysis and review of the classification and recording of direct and indirect expenses of each area of ​​responsibility

In the case of indirect expenses, the calculation bases that will be used to prorate them among the areas of responsibility must be defined. For this, the author leaned on the distribution bases recommended by SUCH, which were explained in the previous chapter..

Below is a table with the indirect costs that in the specific case of our hotels are necessary to prorate among the areas of responsibility:

INDIRECT EXPENSES

CAST BASE

Depreciation M2 buildings with occupied surface

Insurance M2 occupied surface installation

Amortization Expenses of Remodeling M2 of surface occupied by the remodeled areas

Telephone Whiteboard Rental Amount of telephone costs by departments.

Security and Protection Value of AFT inventories and material resources for each area of ​​responsibility

Transportation of Average Personnel of workers by department.

Transport of Clients Volume of income for each area.

Electric Power Installed load capacity by area.

Diesel from Power Plant Idem to the previous one

Estimated consumption M3 water by area.

Liquefied Gas Consumption by area

Auto Insurance Area to which each car belongs.

Email and Data Transmission Volume of information transmitted

Systems Fees Areas in which the system is installed

Advertising and Promotion Revenue volume by area

Cleaning and Fumigation for third parties M2 by fumigated areas

9- Analysis and definition of the activities carried out by each area of ​​responsibility, as well as their classification as Direct, Internal and Indirect Services.

The definition and classification of activities is one of the crucial tasks when implementing an ABC model, since activities are at the heart of the system and its correct definition will depend on its proper functioning. To achieve this purpose, the author relied on the use of surveys, interviews, direct observations and expert criteria; We also use the designs of existing jobs in the personnel area.

For the conceptual delimitation of the activities, a whole series of aspects must be taken into account, which are analyzed in depth by the Management Accounting Principle Commission in a publication on the subject.

The elements that must be taken into account when identifying the activities that will support the system are:

- The tasks are carried out by a person, or by a perfectly identifiable team.

- They suppose or give rise to specific knowledge.

- They maintain a homogeneous character, from the point of view of the behavior of costs, and of the execution measures.

- They are intended to obtain an output.

- They are undertaken to satisfy the demands of an external or internal client.

The identification of activities can be done using three alternative perspectives: A physical perspective: in this sense, the activity is identified with those tasks that are physically linked to a certain stage of a process. A logical perspective: in this case the activity groups all the tasks that have a common task regardless of their physical location. A cost perspective: the activities, in this case, are identified with the cause that determines the incurrence of costs.

Among the essential attributes or elements that usually characterize the activities we can find the following:

- The activity is repetitive, in terms of the tasks they carry out.

- They consume a series of resources that constitute the cost of their execution, requiring their execution over a period of time.

- They aim to obtain an output (product or service).

- It is conditioned by variables such as: limited times, quality compliance, frequency, etc.

In the model that we propose, three types of activities are distinguished:

- Direct Activities (AD) which are those whose main objective is the provision of services to clients.

- Support Activities or Internal Services (SI), are the activities whose main function is to provide services to the direct areas or basic services of the hotel and also to a lesser extent to the indirect areas.

- Indirect Activities (AI), are fundamentally the activities carried out by the administrative areas whose main function is Marketing, Administration, Management and Control of the operation of the hotel.

This classification departs from the international pattern that only defines two groups (Main and Auxiliary). In the case of hospitality, which is classified as a service company, the author considers that the proposed classification is more adapted to the characteristics of this type of company and more clearly reflects the interrelation of cost objectives with different activities. that are carried out in the areas of responsibility or sections of a hotel.

Another aspect that has been taken into account when defining the activities is the fact of identifying those that do not generate value from the customer's point of view. Knowledge of activities that do not generate value is of great importance since it will enable management to concentrate resources on those that generate value and have greater control over activities that do not generate value, in addition to analyzing the possibility of subcontracting, reducing or eliminating them in possible case.

10- Define the first level cost inductors.

Top-tier inductors are used to charge overhead from areas of responsibility to activities.

According to Norkiewicz, Tier 1 inductors are used to align overhead of the activity center with activity sets. Since the predominant cost in most organizational centers is related to human resources, the time spent by staff is used. In other words, the basis on which the staff reports on the dedication of their time to the different activities determines the allocation of expenses to those activities. To achieve the imputation of first-class inductors, it is necessary to measure the time invested by the personnel, or to control or estimate it with respect to each activity.

Regarding the importance of human resources, we must point out that as a general trend, technological development replaces human capital, however, this impact of technological development is not as strong in the tourism sector, which classifies it as a service company, so as Qualitative characteristic human presence is necessary. Also note that personnel expenses are approximately 25% of income. Therefore, I consider that labor as a basis for the distribution of the elements of expenses to activities is really adequate. However, in light of the above, each element of expenses must be analyzed, since there are some expenses that can be directly identified with the activities and others whose distribution base is not necessarily labor,and a factor or percentage is usually used to distribute them among the activities.

11- Define the cost generators of the activities (second level Cost Inductors).

The selection of cost inductors is a crucial stage for the allocation of the costs of activities to products, therefore the cost-drivers, carrier or cost inducer must meet the following requirements:

a) That better respect the cause-effect relationship between: Resource consumption - the activity and the cost objective.

b) In addition to being easy to identify and measure.

c) That it is representative of the usual functions performed by the company.

In the company, an adequate causal analysis of costs must be carried out, that is, of cost inducers, these are those factors or facts that influence the volume of execution of activities, being, therefore, the cause of consumption of the resources used when carrying out these. The cost inducer is a factor whose occurrence generates costs, and which represents the first cause of the level of activity.

An important issue, on the other hand, is to avoid confusion between two concepts that, at first glance, may seem similar or even synonyms, being as different as they are necessary to differentiate; we refer to the concept inducer of costs on the one hand and the concept unit of activity on the other.

Thus, it can be said that the unit of activity can be defined as "the factor or set of factors that determine the emergence of an activity" is the factor that directly affects the cost level of an activity, while the inducer of costs is the factor that motivates the incurrence of costs. In other words, taking the regression analysis as a simile, it could be affirmed that the activity unit is the dependent (resulting) variable, while the cost inducer is the variable that causes the level of costs reached (cause).

The aforementioned is of great importance, the cost drivers are like this, factors that originate the costs of the activities and not taking into account this fact causes that in many occasions, the cost control is applied on the activity units (effects) more than on inductors (causes).

Taking into account the circumstances described above, I set out to define for each activity its corresponding cost drivers.

12- Define the activity units.

The term activity unit has already been previously referred to as a totally differentiated concept of cost inducer, since the latter reflects the cause of the cost, while the activity unit determines or tries to measure the effect, that is, the variable that causes variations in the costs of an activity. The activity unit constitutes the variable that allows quantifying the output obtained by the different activities.

Activity units are used to measure the levels of completion of an activity, such as the actual level achieved, the expected level, or the maximum level (capacity). This measure serves as the basis for two types of applications: the evaluation of the overall productivity of the activity, and the allocation of costs to the different objectives.

In practice, the units of activity can be selected based on any of the following variables: quantification of a situation, volume of work of an activity and finally the volume and complexity of the work of an activity.

When defining the activity units, a series of aspects that directly affect the selection process must be considered, such as:

a) The ease of obtaining the data required by the selected activity unit: Measurement costs.

b) The correlation between the consumption of the activity in which the unit is involved and the current consumption: degree of correlation.

c) The behavior induced by the selected unit of activity: behavioral effects.

13- System Automation and Staff Training.

As it has been observed to implant a system as complex as the ABC, it is necessary to make innumerable mathematical calculations, which would be very expensive and inaccurate if one tried to do them manually; Due to the aforementioned, we consider the use of informatics necessary, in addition to training personnel, if you wish to be successful in implementing an Activity-Based Cost System.

The author considers that the system that is implemented should take as primary information that existing in the traditional accounting system and from this implement the steps to follow to calculate costs according to the proposed methodology.

3.2 Phase II Calculation of the cost of activities

After completing the preparatory stage, it is appropriate to proceed with the stage in which activity costs are calculated; The steps to follow are those.

Step One: Distribute or prorate overhead and overhead to cost centers or areas of responsibility.

Here we proceed to distribute indirect general expenses (including fixed expenses such as depreciation, rentals, insurance, etc.) to each of the areas of responsibility or cost centers in which the hotel is divided, in a similar way to the models traditional. For this, the indirect costs and the distribution bases defined in point 8 of the preparatory phase are taken into account.

Second Step: Distribution of the costs of the areas of responsibility or cost centers between the activities. (see annexes 22)

Here we proceed first to the calculation of the first-level cost drivers, these were defined together with the activities that are part of the system in the preparatory stage. Taking the first-level cost drivers as the basis for distribution, we proceed to distribute the costs of the areas of responsibility to the activities that have generated them, whether they are main, internal or indirect services.

This calculation is made for each of the areas of responsibility or cost center. We proceed to make an analysis of each element of expenses and charge each one of the activities the corresponding part according to the consumption that each activity has made of that element of expenses.

Recall that direct expenses from direct activities and extraordinary expenses are not included among the expenses that must be distributed to the activities, the former are charged directly to the cost objectives and the latter are not included in the calculation of costs and therefore they are recorded as expenses for the period.

Step Three: Re-grouping of expenses for each activity.

In order for similar activities to exist in the different centers, they were grouped together in order to simplify the allocation processes and to determine the costs that originate in each of the company's activities.

In this case, some of the activities that are grouped are the following:

Generator Activity

Invoice clients No. of Invoices

Control staff Hours worked

Address claims No. of claims

Control supplies No. of orders

Control quality No. of inspections

3.3 Phase III Calculation of the cost of products and / or services.

After the calculation of the costs of the activities is completed, the calculation of the costs of the products and / or services offered by the hotel corresponds to any other previously defined cost objective.

Step Four: Calculate the cost drivers of internal service activities and then distribute their costs to direct and indirect activities.

Here, the expenses of the activities of internal services are charged to the activities to which they provide said services, whether direct or indirect. Note that this variant departs from the universal pattern in which only main activities and auxiliary activities are defined, and the cost of the latter is distributed to the main activities.

Step Five: Calculate the cost drivers of direct and indirect activities and then distribute the costs of these to the objectives.

Here the so-called second-level inducers are calculated, which are nothing more than the cost inducers that relate the activities to the cost objectives, which will serve as the basis for charging the cost of these activities to the cost objectives, be they: products, clients, services, etc.

Regarding the costs of indirect activities, three alternatives are presented: the first is to charge the costs of indirect activities to direct activities, the second is to charge the costs of indirect activities directly to the cost objectives, and the third is to charge the costs of indirect activities to the period.

As I explained earlier, some authors consider that the expenses of indirect activities, which are the expenses of the areas of administration, management and marketing, should not be charged to the cost of the products.

In the author's opinion, the variant that seems to be more appropriate is the one that charges the costs of indirect activities directly to the cost objectives. The author considers that these expenses, if they should be part of the cost of the products and / or services, but distributing these to the direct activities, can reduce the clarity and objectivity of the allocation process.

Step Six: Assign direct costs to cost objectives.

Here the expenses that are clearly and directly identified with the cost objectives, are assigned to them without further ado, these expenses are generally expenses of materials and to a lesser extent labor.

3.4 Phase IV Analysis of the results and Adjustment.

In this phase, a detailed analysis of the results obtained is carried out and, if necessary, adjustments are made to the activity classifiers, cost drivers, distribution bases, etc.

Within the implementation process, this stage is considered by the author to be of great importance, since it will allow correcting any errors that exist, in addition to setting up the system for immediate use.

3.5 Budget and Activity Based Management System

The author of this research wishes to state his conviction that Activity Based Costing (ABC Activity Based Consting) is only part of a system, also integrated by Activity Based Budgeting (ABB Activity Based Budgeting) and Based Management in the Activities (ABM Activity Based Management), but as we are not the objective of this research we will not delve into these topics.

The fundamental principles of Activity Based Costing and the proposed methodology for its implementation as a result of this research, provide a substantive basis for the development of an adequate process for preparing and controlling budgets for activities in the facility.

The Activity Based Budgeting (ABB Activity Based Budgeting) thus constitutes a logical methodological progression based on Activity Based Costing (ABC Activity Based Consting) and Activity Based Management (ABM Activity Based Management).

From the above derives the fact that if activity costing is implemented, it is necessary to budget by activities and manage by activities

4. Final Considerations

- Because the hotel industry is a service company, having high indirect costs, developing in an environment of strong competition, having an adequate computer base and being in need of greater economic efficiency, enables the implementation of ABC.

- The design of a methodology that adapts to the characteristics of Cuban hotel companies facilitates the work of implementing this costing technique.

- The use of computer techniques is vital if you want to achieve success in the implementation of ABC.

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