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When I had worked at a restaurant, there was a point in time where I believe the management team ignored relevant costs. The issue happening within the restaurant was that the staff started having a difficult time with turning tables over for new customers. In other words, there was too few bussers cleaning tables in time to bring in a new group of people. This slowed the process and left longer waiting lines. In correspondance, the restaurant decided to take a couple tables out of the restaurant to lower the capacity. This made it easier to manage the work load, clear tables, and sit new guests in a timely manner. However, there was relevant cost that was clearly ignored. “Consider all costs and benefits that vary with the consequences of a decision and only costs and benefits that vary with the consequences of a decision. Theses are the relevant costs and relevant benefits of a decision” (Froeb, et al., 2018). A decision that was not considered was adding to the staff to ease the workload per person. By doing the quick math, although you will be adding a single new busser to the team which costs money, you will also make roughly $20 per table per customer group that comes in. There is a lot more profit and revenue driven in from those two tables alone that would over lap the cost of paying a new worker an hourly wage. Simply put, say bussers make roughly $9/hour and the restaurant is only open 6 hours a day. In addition, say that each table sat makes an average of $20 (excluding tips) and a new group comes in every hour. Now there were two tables taken out of the restaurant. So on a busy night (which is always was busy), the two tables will make at least $40 combine each hour for 6 hours. That is a total of $240 a night, whereas, the busser will make an $54 per shift before taxes. Had the restaurant considered these relevant costs, they could have profitted quite a bit of money. Moreover, they still did not help their long wait problem since they took two tables out of the restaurant, there was more people crowding in hoping to be seated.
Froeb, L. M., McCann, B. T., Shor, M., & Ward, M. R. (2018). Managerial economics: A problem solving approach (5th ed.). Cengage Learning. ISBN-13: 9781337106665
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