Anna was a new production analyst at RBC, Inc., a large furniture factory. One of her first tasks was to update pre-determined overhead allocation 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 upcoming year. What Anna 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 Mark, the factory manager, she was told to spread the increases out over the other activity costs to "smooth out" the trends. She was intimidated by Mark, since she had just started, and he had been the factory manager for a long time. However, she knew something wasn't quite right. Then one night, she was at a restaurant and overheard a few employees who worked at RBC talking. They were joking about the work they had done fixing up Mark's beach home on the Isle of Palms last year. Suddenly everything made sense. Mark had been using factory labor, tools, and supplies to have his beach house renovated on the weekends. Anna had a distinct feeling that is she went up against Mark on this issue, she would come out the loser. She decided to look for another job elsewhere.

What are some ways that ABC cost data are useful in manufacturing companies?

What are some of the other options that Anna might have considered?

How would you have handled this situation if you were in Anna's shoes?