Question
Teguh Sdn Bhd manufactures keyboard for the computer industry. Demand for the companys products has fallen in recent months, and the firm has cut its
Teguh Sdn Bhd manufactures keyboard for the computer industry. Demand for the companys products has fallen in recent months, and the firm has cut its production significantly. Many unskilled workers have been temporarily laid off. Top management has made a decision, however, not to lay off any highly skilled employees, such as inspectors and machinery operators. Management was concerned that these highly skilled employees would easily find new jobs elsewhere and not return when production returned to normal levels. To occupy the skilled employees during the production cutback, they have been reassigned 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 continued to receive their normal wages, which average RM19 per hour. However, the normal wages for Maintenance Department employees average RM11 per hour. The supervisor of the Maintenance Department recently received the March performance report, which indicated that his departments labor cost exceeded the budget by RM21,230. The departments actual labor cost was approximately 85 percent over the budget. The department supervisor complained to the controller. Required: As the controller, how would you respond? Would you make any modification in Teguhs responsibility-accounting system? If so, list the changes you would make. Explain your reasoning.
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