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ABC costing is a system of allocating overhead costs to different products or jobs based on the activity engaged by those products or jobs. This is considered the most logical way of allocation as the allocated cost represents the portion of activity done on the product or job.

ABC costing is an improved technique for allocating overhead costs. It is the most scientific method as each product or job is allocated only that portion of the cost that is associated with the activity performed. For manufacturing companies, this method is most useful.

The ways ABC cost data can be useful for manufacturing companies are as follow 鈥�

1) Cost control 鈥� Cost control is the first implication of the ABC cost data. ABC cost data provides information for all activity cost and their allocation to products or jobs. So the unnecessary cost can be easily located and reduced as per the cost target. It also helps in identifying cost-saving areas.

2) Budgeting 鈥� Budgeting is an essential financial activity for all businesses. It helps in estimating the relevant costs and incomes. Budgeting in manufacturing companies is related to estimating the material cost, labor costs, and other manufacturing-related activities.

Indirect activities in manufacturing companies are 鈥� quality inspection, supervisor, testing, etc.

So ABC data can be helpful in estimating the different costs relating to manufacturing overheads.

3) Profitability analysis 鈥� profitability analysis is another implication of ABC cost data. Profitability is not only analyzed in terms of net income but also includes a dimension of analyzing operating profit and operation cost. In manufacturing companies, it is most important to know the profitable and non-profitable production or products.

4) Pricing decisions 鈥� Last but not least application of ABC data is to assist in fixing prices. Price is fixed after taking all factors into consideration. As ABC data provide cost details for all activities relating to all products, it becomes easy to determine the price.

Anu had several considerable options. Besides quitting the job an employee can inform any unethical practice in the business through the following ways 鈥�

a) Audit committee 鈥� Every public company needs to set up an audit committee. The audit committee's work is to check the regularities and irregularities in the financial transactions. Anu could have reached the audit committee anonymously and conveyed their message.

b) Upper management 鈥� upper management is the primary body for monitoring and making decisions. In case an audit committee is not there in the business, upper management can be contacted to inform any malpractices.

c) Ethical and fraud committee 鈥� Some companies also set up ethical and fraud committees to prevent any case of malpractices. They can also be approached in such situations.

d) External agencies 鈥� If the upper management is ineffective or the audit committee or any other committee is not there, external agencies like external auditors and law enforcement agencies can be informed about such malpractices.