Activity-Based Costing and Other Cost Management Tools.
Fraud Case 18-1
Fraud Case 18-1
Anu Ghai was a new production analyst at RHI, Inc., a large furniture factory in North Carolina. One of her first jobs was to update the activity rates for factory production costs. This was normally done once a year, by analyzing the previous year's actual data, factoring in projected changes, and calculating a new rate for the coming year. What Anu found was strange. The activity rate for “maintenance” had more than doubled in one year, and she was puzzled how that could have happened. When she spoke with Larry McAfee, the factory manager, she was told to spread the increases out over the other activity costs to “smooth out” the trends. She was a bit intimidated by Larry, an imposing and aggressive man, but she knew something wasn’t quite right. Then one night she was at a restaurant and overheard a few employees who worked at RHI talking. They were joking about the work they had done fixing up Larry's home at the lake last year. Suddenly everything made sense. Larry had been using factory labor, tools, and supplies to have his lake house renovated on the weekends. Anu had a distinct feeling that if she went up against Larry on this issue, she would come out the loser. She decided to look for work elsewhere.
Requirements
1. Besides spotting irregularities, like the case above, what are some other ways that ABC cost data are useful for manufacturing companies?
2. What are some of the other options that Anu might have considered?

Please upgrade my response DANIELLE CPA
1. Besides spotting irregularities, like the case above, what are some other ways that ABC cost data are useful for manufacturing companies?
ABC data can be used to highlight areas where costs are out of control, where cost savings should be considered, or more efficient operations should be looked into. They also can be used for budgeting, analyzing profitability of various products, and for pricing decisions.

2. What are some of the other options that Anu might have considered?
If a company has an audit committee, an employee can usually contact them anonymously. If, however, upper management is in on the scheme, the employee is in a very weak position, and should consider, like the case above, getting out. Alternatively, an employee could tip off either the outside auditors, or law enforcement.
Reference
Horngren, C.T., Harrison W.T., & Oliver, M.S. (2012). Accounting (9th ed.). Upper Saddle River, NJ: Pearson Prentice Hall