A Study in Responsibility Accounting The David Machine Tool Company is in the doldrums. Production volume has fallen to a ten-year low. The company has a nucleus of skilled tool-and-die men who could find employment elsewhere if they were laid off. Three of these men have been transferred temporarily to the building and grounds department, where they have been doing menial tasks such as sweeping, washing walls, and so on for the past month.

These men have earned their regular rate of $8 per hour. Their wages have been charged to the building and grounds department. The supervisor of building and grounds has just confronted the controller as follows: “Look at the cockeyed performance report you pencil pushers have given me. The helpers’ line reads:

BUDGET ACTUAL DEVIATION Wages of helpers $1,764 $4,704 $2,940 Unfavorable

“This is just another example of how unrealistic you bookkeepers are!

Those tool-and-die guys are loafing on the job because they know we won’t lay them off. The regular hourly rate for my three helpers is $3. Now that my regular helpers are laid off, my work is piling up, so that when they return they’ll either have to put in overtime or I’ll have to get part-time help to catch up with things. Instead of charging me at $8 per hour, you should charge about $2—that’s all those tool-and-die slobs are worth at their best.”

required As the controller, what would yoy do now? Would you handle the accounting for these wages any differently?

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