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4 DQ
DQ 1 Activity-Based Costing and Other Cost Management Tools

Fraud Case 18-1. Complete all parts of the case and respond to at least two of
your classmates’ postings.
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
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?
2 Cost-Volume-Profit Analysis
Discuss how the following affect the break-even point:

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