Alston Electronics Company manufactures complex circuit boards for the aerospace Industry Demand for the company’s products has fallen in recent months, and the firm has cut its production significantly. Many unskilled workers have been temporarily laid off. Top management made a decision, was to lay off any highly skilled employees such as inspectors and machinery operators. Manage concerned that if these highly skilled employees were laid off, they would easily find new jobs elsewhere, and not return when Alston’s production returned to usual levels.
During the production cutback the skilled employees have been re-assigned temporarily to the Maintenance Department. Here they are performing general maintenance tasks, such as repainting the interior of the factory, repairing the loading dock and building wooden storage racks for the warehouse. The skilled employees continue to receive their normal wages, which average $30 per hour. However, the usual wages for Maintenance Department employees average $20 per hour.
The supervisor of the Maintenance Department recently received the March performance report, which indicated that his department’s actual labour cost exceeded the budget by $48 000, or 90 per cent. The department supervisor complained to the accountant.
As the accountant, how would you respond? Would you make any modifications to Alston’s responsibility accounting system or performance measurement system? If so, list the changes you would make. Explain your reasoning.