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ACC 206 Week 4 BD and Fraud Case 18-1

Activity-Based Costing and Other Cost Management Tools. Fraud Case 18-1.And Cost-Volume-Profit Analysis. Discuss how the following affect the break-even point: increase or decrease in unit sales price, increase or decrease in variable cost per unit, increase or decrease in fixed costs.

Fraud Case 18-1

AnuGhai was a fresh production analyst at RHI, Inc., a big furniture plant in North Carolina. Among her first jobs was to upgrade the activity rates for plant manufacturing expenses. This was typically done once per year, by studying the last year’s actual data, factoring in forecasted modifications, and computing a fresh rate for the next year. What Anu found out was unusual. The activity rate for “maintenance” had more than doubled in a year, and she was perplexed how that might have taken place. When she talked with Larry McAfee, the plant administrator, she was informed to distribute the increases out across the other activity expenses to “smooth out” the tendencies. She was a little bit threatened by Larry, an imposing and aggressive person; however she knew something wasn’t really correct. After that one night she was in a cafe and overheard some workers who worked at RHI talking. They were kidding regarding the work they had performed renovating Larry’s house at the lake a year ago. All of a sudden everything made sense. Larry had been utilizing plant workers, tools, as well as materials to get his lake home refurbished on the weekends. Anu had a distinct sense that in case she went up against Larry on this problem; she would end up the loser. She made a decision to search for work somewhere else.

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?

Discuss how the following affect the break-even point: increase or decrease in unit sales price, increase or decrease in variable cost per unit, increase or decrease in fixed costs.