The Sargent Metal Fabricators has
been manufacturing machine tools for a number of years and has an industrywide
reputation for high-quality work. The company has been faced with irregularity
of output over the years. It has been company policy to lay off welders as
soon as there was insufficient work to keep them busy and to rehire them when
demand warranted. The company, however, now has poor labour relations and
finds it very difficult to hire good welders because of its layoff policy.
Consequently, the quality of the work has been declining steadily.
The plant manager has proposed that the welders, who earn $20 per hour, be
retained during slow periods to do plant maintenance work that is normally performed
by workers earning $13 per hour in the plant maintenance department.
You, as a controller, must decide the most appropriate accounting procedure
to handle the wages of the welders doing plant maintenance work. What
department or departments should be charged with this work, and at what rate?
Discuss the implications of your plan.