RIS Watch Limited manufactures wrist watches for various brands. The company designs and assembles products according to customers' specifications. RIS uses normal costing to cost its job orders and applies plant-wide manufacturing overhead (MOH) based on direct labour hours (DLH). RIS sells its products on fixed price or on cost plus basis. The watches are designed in the Design Department. Once the design is approved, the material is sourced from contract manufacturers and the products are manually assembled in the Assembly Department. The assembly workers are paid an hourly rate of $8 per DLH and the designers are paid a lump sum fee based on the complexity of each job. The designer is also responsible to oversee the completion of the assigned job order. In consideration of the added responsibilities, they are entitled to an incentive payment equal to 15% of gross profit (computed based on normal product cost) for each job order completed within specified deadline. For product costing purposes, the company treats all bonuses and incentive payments as period expenses, and all spoilage as abnormal spoilage specific to each job. As such, the designer has incentive to complete the jobs in a cost effective and timely manner. RIS's budgeted MOH, DLH and Machine Hours (MH) for the year 20X8 are estimated as follows. MOH DLH MH Design Department Variable $2,400,000 10,000 12,000 240,000 2,000 Assembly Department Variable Assembly Department Fixed $1,200,000 $2,400,000 Appended below are relevant data for three job orders processed by RIS during December 20X8. Job Order #124 #125 #126 Quantity in units 4,000 4,000 2,000 Contract Price $360,000 $300,000 Cost plus** Direct Materials $225,000 $232,000 $126,000 Designer fee $5,000 $8.000 $12,000 Assembly labor $18,000 $9,000* $7,200 * 40% assembled ** Normal Product Costs plus 30% Wilson, a designer and account manager for Jobs #124 and #126 complained that the company's policy on overhead application cost him to earn less incentive payment for both jobs. He suggests that MOH should be applied using departmental rates based on appropriate cost drivers. With the help of other designers, he obtained the machine times used in the Design department for Jobs #124 and #126 were 40 hours and 50 hours respectively. Required: Explain the basis of Wilson's complaint with clear supporting computations. RIS Watch Limited manufactures wrist watches for various brands. The company designs and assembles products according to customers' specifications. RIS uses normal costing to cost its job orders and applies plant-wide manufacturing overhead (MOH) based on direct labour hours (DLH). RIS sells its products on fixed price or on cost plus basis. The watches are designed in the Design Department. Once the design is approved, the material is sourced from contract manufacturers and the products are manually assembled in the Assembly Department. The assembly workers are paid an hourly rate of $8 per DLH and the designers are paid a lump sum fee based on the complexity of each job. The designer is also responsible to oversee the completion of the assigned job order. In consideration of the added responsibilities, they are entitled to an incentive payment equal to 15% of gross profit (computed based on normal product cost) for each job order completed within specified deadline. For product costing purposes, the company treats all bonuses and incentive payments as period expenses, and all spoilage as abnormal spoilage specific to each job. As such, the designer has incentive to complete the jobs in a cost effective and timely manner. RIS's budgeted MOH, DLH and Machine Hours (MH) for the year 20X8 are estimated as follows. MOH DLH MH Design Department Variable $2,400,000 10,000 12,000 240,000 2,000 Assembly Department Variable Assembly Department Fixed $1,200,000 $2,400,000 Appended below are relevant data for three job orders processed by RIS during December 20X8. Job Order #124 #125 #126 Quantity in units 4,000 4,000 2,000 Contract Price $360,000 $300,000 Cost plus** Direct Materials $225,000 $232,000 $126,000 Designer fee $5,000 $8.000 $12,000 Assembly labor $18,000 $9,000* $7,200 * 40% assembled ** Normal Product Costs plus 30% Wilson, a designer and account manager for Jobs #124 and #126 complained that the company's policy on overhead application cost him to earn less incentive payment for both jobs. He suggests that MOH should be applied using departmental rates based on appropriate cost drivers. With the help of other designers, he obtained the machine times used in the Design department for Jobs #124 and #126 were 40 hours and 50 hours respectively. Required: Explain the basis of Wilson's complaint with clear supporting computations