Gopal Catering Services operated its corporate in Hyderabad city, located in South India, Telangana state. The firm desired to start food deliveries at varying regions in Hyderabad city. Gopal believed maintaining and running costs of each delivery would enable the company to generate more profits. However, Gopal was not aware of the best alternative it would employ to generate more profits. This paper aims at examining how costs impact the introduction of the new meal.
The first section of this paper devices a brief outline of Gopal Catering Services. The second segment summarizes the impact of cost attribution and cost dynamics on the Gopal Catering Service’s leadership to address the cost unit. The third sector explores theoretical models, including the transaction cost theory, the attribution cost theory, and the cost theory. This paper uses incremental analysis to develop decisions to help Gopal know whether to introduce or drop the new meal. According to the findings of this paper, adding a new meal will attract new cost expenses. Hence, Gopal should consider dropping the new meal to avoid additional costs that may impact the company’s profitability.
Gopal Catering Services
Gopal’s objective was to provide the standard food requirements of bachelors, students, offices, and families in distinct regions crosswise to Hyderabad. The Gopal Catering Services profit was generated from Rs. 12000 average revenue daily from each of the outlets. The costs incurred in each outlet included food, operating expenses such as telephone and electricity, and backing up staff wages, among others (Kumar & Perepu, 2021). Three passages were opened in the 20018 2019 financial year fourth quarter (Kumar & Perepu, 2021). All the Gopal Catering Services operations were run using single administrative offices situated in the town’s middle. Administrative offices accounted for maintaining all GCS accounting records. At the end of the financial year, the company desired to know the profits and expenses they incurred during the period.
Impact of Cost Attribution and Cost Dynamics on Gopal’s Leadership
Cost attribution enables leaders to create management inferences by interpreting and observing specific behavioral and environmental sues, impacting frontrunners’ expectations for a company’s future performance. Cost attribution involves determining how various activities and inputs affect a firm’s output to obtain costs based on causation (Engl, 2021). Gopal Catering Services, GCS was the lone proprietary enterprise owned and run by Gopal.
On top of incurring costs on the purchase of cutlery, Gopal incurred regular costs on labor, purchase of raw materials, and other varied expenses for running the business operations. The raw materials included non-vegetarian products, vegetables, and provisions (Kumar & Perepu, 2021). The price of raw materials kept on changing in regards to the market conditions. Thus, Gopal’s costs were not steady or fixed, making it hard for the company to address cost per unit. Significant expenses were incurred on the staff responsible for cooking activities.
The other charges were affiliated with the supporting staff in the stores and kitchen. The cooking staff expenses could be fixed and amounted to Rs.20,000 per month for every chef and approximately Rs.10000 per month each to the assistant cooking staff (Kumar & Perepu, 2021).
The assistance staff in-store and kitchen activities management were also paid Rs.8000 each month (Kumar & Perepu, 2021). The store manager received a 15000-rand salary per month (Kumar & Perepu, 2021). By the culmination of the 2018-2019 year, two kitchens were functional, and every kitchen had one chef and two assistant chefs, three assistant kitchen staff, and one store manager (Kumar & Perepu, 2021). Therefore, adding a new meal could negatively impact the workers’ salaries since they could be deducted to facilitate the payment of other workers who could be employed to serve the new meal.
A new kitchen was opened in 2018-2019 because of many orders from schools and colleges (Kumar & Perepu, 2021). On top of the mentioned costs, the company incurred additional expenses on kitchen management like electricity, rent, telephone, gas cylinders, and other various expenses. Porter uses cost dynamics to designate that on top of analyzing cost behaviors, companies must consider how relative and absolute value costs change over time depending on the appropriate strategies. Cost dynamics establish leadership competitiveness by offering low production costs that motivate leaders to execute their tasks with ease (Swamy & Dharani, 2019). Thus, cost dynamics could help Gopal encourage its leaders to afford prices that enhance their attractiveness.
For efficient delivery of orders, GCS hired several vehicles to facilitate the fast delivery. Delivery expenses were based on the time of delivery and the distance of customers. Averagely, the delivery cost totaled Rs.150 per trip to deliver orders across different places in the city. In the 2018-2019 year, GHC could supply food to 2 school canteens, 2 private hostels, 10 office canteen, and 3college canteens. GCS also delivered marriage orders, office and family events, and birthday events. The least number of orders was fifty people, while the maximum was 1500 (Kumar & Perepu, 2021). Due to the increased orders GCS received, the company opened an administrative office in the city in 2018-2019 to make the operations efficient (Kumar & Perepu, 2021). The office played the role of accepting and processing kitchen orders to enhance the fast delivery of orders.
The city-based office coordinated all activities of the company and acted as a single point for every customer. The office had operational staff, and each was paid a monthly income of Rs. 15000 and one assistant staff who could earn Rs 8000 per month (Kumar & Perepu, 2021). In addition, the city office registered an additional cost in the form of rent, electricity, maintenance, and telephone expenses. Gopal was delighted with the progress of his business operations (Kumar & Perepu, 2021). In four years, he gained his customers’ trust and expanded his company’s profits by supplying foods to events, functions, offices, and freshly established outlets. Costs were registered on raw materials, wages, and expenses on maintenance of food and kitchen outlets. It also incurred costs on running the newly established city office and paying its employees.
Theoretical Models/Frameworks
Theoretical models provide specific lens or perspectives that help businesses or researchers to assess a theme. Individuals often apply theoretical models to describe ideas and explain circumstances. Utilizing a theoretical model enables individuals to structure their thoughts. In addition, theories help identify generalizations limits, most influential variables, and the importance of examining how the variables differ and the circumstances that impact them. The theoretical models that help address reduction of food waste costs in Gopal include policy theory, attribution theory and theory of cost.
Policy theory
Considering the focus of retail, the goal is to establish propositions on policy options to be used by workers to help reduce food waste costs. Policy theory helps to identify policy options that promote behavior change towards efforts of reducing food waste and its associated costs (Cuypers et al., 2021). Drawing a basis from this theory, the effectiveness of bringing about behavior change is described in the theory based on how a policy aims to cause the change.
The model identifies that there are associations between the input and outcome of a policy and assumes that during the change to achieve improved outcomes, there are tools that can be used to reach the target market including distribution of information and enforcement of laws. Gopal can apply this theory to find the impact, outcome, and output of their effort towards behavior change for the success of the project. The theory enables the organization to first identify the change needed for reducing food waste cost, the factors needed to cause the change to e used in coming up with policy options.
Literature from Lipinski shows that a food waste inventory system was adopted to help leaders in that organization identify the cost of food wasted for staff to implement other options that reduce food loss and waste. The automatic tracking could establish the place and how waste specifically occurs (Cuypers et al., 2021). Leaders in Gopal can leverage technology to control temperatures for extending shelf life and use devices with reminders on the expiry dates of products. This will help in managing food stocks to maintain freshness and quality while minimizing food waste.
Attribution Theory
Attribution theory aims at helping people or organizations to comprehend the human behavior causes. The attribution theory lays its foundation on how individuals or businesses know the reasons for their behaviors (Engl, 2021). The theory also bases how other individuals take their actions and desire to assign what causes the behaviors they view rather than making assumptions on their random behaviors, enabling people to disregard the control feelings over situations and their behaviors. Psychologist Fritz Heider first developed the attribution theory in 1896–1988 in his 1958 manuscript ‘The Psychology of Interpersonal Relations’ (Engl, 2021). Therefore, the attribution theory enables managers to understand worker behaviors and assists employees also to understand their performances.
Attributions are serious to management since perceived behavior reasons may impact the actions and judgments of employees and managers. The attribution theory may also impact employee motivation since the workers who perceive the origin of their achievement to be separate from their control have high chances of avoiding attempting new tasks. The workers may also misplace encouragement to attain better in their workplaces (Engl, 2021). Hence, comprehension of individuals’ attributes may have strong impacts on managerial effectiveness and employee performance.
There are multiple studies of food waste prevention since it has become a policy priority worldwide. Households are found to lead to food waste and supply chain and so they are responsible for most of the food being wasted. Greek households were surveyed using a questionnaire to analyze food waste behaviors in consumers with the aim of identifying factors influencing food waste among the people (Engl, 2021).
The study examined the relationship between attitudes and consumer habits and the results revealed that the intention to prevent food waste depends on waste generation habits and attitudes towards food waste. Organizations like Gopal can therefore educate individuals to influence their attitudes and behaviors towards food waste and understand individual attributes of workers through applying the attribution theory.
Theory of Cost
According to this theory, service or product price determination is not easy since various elements govern prices. The theory of cost argues that business costs highly determine its spending and supply. This theory considers cost concepts, short-run summation, average costs, and long-run costs alongside economy scales (Herbener, 2017). Various factors distinguish cost function, including product size, output size, and operation scales, among other factors. Cost production requires detailed comprehension by economics to operate their corporation, increase productivity and profits.
During decision-making, cost information systems play crucial roles in the decision-making of organizations. It ensures control of operations, activities, processes and not ultimate costs. A survey conducted in America reveals that over 40 million tons of food are wasted yearly in that country alone (Herbener, 2017). The food can feed approximately one billion individuals as a result, there are costs attached to this kind of food waste. Food is wasted at all levels of distribution and non-consumable food is usually wasted due to the overstocking by consumers on problems in packaging and storage by producers. Wastage leads to sunk purchase costs and creates other problems including social costs, resource, and environmental costs.
Policies have been developed to reduce wastage as taxes are imposed on food trash forcing consumers to purchase only what they need and as a result, there are higher food prices. Food waste has grown by a large percentage of about 204% in 50 years but proactive measures are being taken by businesses and governments to combat it (Herbener, 2017). Gopal needs to carefully examine how food is wasted and its associated costs to find the best solution to the problem.
Incremental Analysis
Incremental analysis is a method businesses use to develop their decisions to establish cost differences among alternatives. Incremental analysis is also referred to as the differential analysis, marginal analysis, or cost approach since it disqualifies past and sunk costs. Incremental analysis is important in business strategies involving self-product or outsourcing a function. It is a technique commercial applies to solve problems that require accounting decision-making. In addition, incremental analysis can identify the capacity outputs of alternatives in comparison.
Analysis and Calculation Using the MS Excel Submission Link
Gopal aims at producing new standardized therapeutic diet meals in addition to their current menu. This analysis applies the incremental analysis to produce two scenarios that demonstrate when the new diet meal can be produced and when it can be dropped. The incremental analysis will help Gopal Catering Services to regulate the cost insinuations of the two substitutions. Non-applicable sunk expenses, or one-time charges, are not encompassed in the examination. Incremental analysis too assists with assigning limited possessions to merchandise lines to safeguard a scarce benefit is used to extreme benefit.
According to the above analysis, it is evident that if Gopal decides to introduce a new meal, they will incur more costs due to the additional commodities the company will require to meet customer needs. Gopal should consider dropping the new meal since it may end up impacting its financial position and profitability. Hence, Gopal should consider eliminating some of its expenses to introduce the new meal instead of utilizing inexpensive materials.
Recommendation and Conclusion
The total revenue of Gopal will equal its total cost at Rs 4420 at this point they will not be able to experience any loss or profit. During operation, they will additional costa that increase when a new meal is introduced since it attracts more costs. The additional costs range from borrowed money, additional investments, supporting staff, operating staff salary, delivery charges, the store manager salary, kitchen and store activities, cooking staff, and kitchen equipment. Gopal Catering Services should consider dropping the establishment of the new mean since it will increase its annual expenses, impacting its productivity and profits.
References
Cuypers, I. R., Hennart, J. F., Silverman, B. S., & Ertug, G. (2021). Transaction cost theory: Past progress, current challenges, and suggestions for the future. Academy of Management Annals, 15(1), 111-150. Web.
Engl, F. (2021). Causal responsibility attribution: Theory and experimental evidence. Web.
Herbener, J. M. (2017). Time and the theory of cost. In the Economic Theory of Costs (pp. 147-166). Routledge.
Kumar M V., & Perepu, I. (2021). Costing and Cost Sheet – Analyzing the Costs at Gopal Catering Services – The Case Centre. The Case Centre. Web.
Swamy, V., & Dharani, M. (2019). The dynamics of finance-growth nexus in advanced economies. International Review of Economics & Finance, 64, 122-146. Web.