Question

The Mid-Atlantic Metal Fabricating Company has been manufacturing machine tools for a number of years and has had an industry-wide reputation for doing high-quality work. The company has been faced with fluctuations in demand 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.
Because of this lay-off policy, the company now has poor labor relations and finds it difficult to hire good welders. Consequently, the quality of the products has been declining steadily.

The plant manager has proposed that welders, who earn $20 per hour, be retained during slow periods to do menial plant maintenance work that is normally performed by workers earning $14 per hour in the plant maintenance department.
You, as controller, must decide the most appropriate accounting procedure to handle the wages of the welders doing plant maintenance work. What department(s) should be charged with this work, and at what rate? Discuss the implications of your plan.



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  • CreatedNovember 19, 2014
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