Critical Thinking Case:

Daryl Nixon was a new production analyst at RHI, Inc., a large furniture factory in Georgia. One of his first jobs was to update the predetermined overheard allocation rates for factory production costs. This is 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 Daryl found was strange. The activity rate for "maintenance" had more than doubled in one year, and he was puzzled as to how that could happen. When he spoke with Negan Brown, the factory manager, he was told to spread the increases out over the other activity costs to "smooth out" the trends. He was a bit intimidated by Negan, an imposing and aggressive man, but he know something wasn't quite right. The one night Daryl was at a restaurant and overheard a few employees that worked at RHI talking. They were joking about the work they had done fixing up Negan's home at the lake last year. Suddenly everything made sense. Negan had been using factory labor, tools, and supplies to have his lake house renovated on the weekends. Daryl had a distinct feeling that if went up against Negan on this issue, he would come out on the losing end. He 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 Daryl might have considered? Remember to post a thoughtful and concise response. Responding to at least 2 classmates is also required to be considered for full points.