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留学生财务会计论文-成本管理财务分析-FINDINGS AND ANALYSIS-cost management and


3.1 Overview of cost management and sample restaurant chain business

3.1.1 Background
China Hotel Association (CHA, 2009) reported that the tourism consumption and high-end business consumption had reduced significantly recently. The severe environment of the hotel industry leads the competition among hotels, of which the most direct presence is the price competition; in other words, behind price, the essential factor is the competitive cost (CHA, 2009).
According to Hilton et al. (2008, p.882):
‘…cost is the sacrifice made, usually measured by the resources given up, to achieve a particular purpose…’; and ‘…cost management is a series of activities including forecasting, planning, checking, control and analysis…’.
Michael E. Porter (1980 &1986) suggested three competitive strategies, of which the “overall cost leadership” is most easily understood. Low-cost strategy which means, reducing cost through the special methods, urges managers to create competitive advantages according to different circumstances in order to achieve a cost reduction strategy (Poter, M.E., 1980). Cost management aims to excavate internal potential constantly to reduce cost and improve cost efficiency in order to realize the profit maximization. Then, every activity of cost control should consider about their impact on profit, whatever the pros or cons, otherwise they would lose their meaning (Huang, Y.C., 2006, p.157-158). If only focusing cost management on saving and reducing monetary spending, to control spending blindly and cataloguing without analysis, would lead to lower costs, but benefit source also is cut off, which would trap into a vicious circle:

3.1.2 Overview of Chain Q business
(For simplicity and security needs, the restaurant chain would be named ‘Chain Q’ in the context below.) Introduction
The sample restaurant chain was founded in Zhejiang province in China in September 2003; it is headquartered in Shaoxing. After nearly 7 years’ development, Chain Q has become a medium-scale chain of Chinese restaurants which own sixteen branches mainly located in six major cities and regions in the Yangtze River delta economic circle. The chain Q owns an area of 38,000 square meters, nearly 4,200 employees, and a total of more than 2200 tables. The firm’s deep commitment to innovation and development, style and health started with the first restaurant 7 years ago.
Chain Q are running traditional Chinese food in principal, especially doing well is the eastern Chinese food because of the location of its branches and marketing positioning. Chain Q takes “the classics, the traditional, the authentic” as the management ideas, devoting itself to becoming a global food and beverage brand. Cost structure
Chain Q program the similar operation structure in all its branches in order to manage business simply and directly, as shown in Figure 3-1-1, which is the structure of Chain Q. Cost structure of Chain Q can be divided into two categories: direct (Production) and indirect (non-production) cost. Direct costs refer to the costs of materials of finished food products, including specific food costs and beverage cost, which is the main expense. On the other hand, indirect cost is the cost created in the processing, such as labor cost and other overhead expenses of which, the labor costs include the salary, bonus, training and welfare and so on; while the overhead expenses are rent and rate, energy support, depreciation, interest, tax, insurance and so on.

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