The Diamante Company is an industrial machinery and equipment manufacturer with several production departments. The company employs automated and heavy equipment in its production departments. Consequently, Dinteman has a large repair and maintenance department (R&M department) for servicing this equipment.The operating efficiency of the R&M department has deteriorated over the past two years. For example, repair and maintenance costs seem to be climbing more rapidly than other department costs. The assistant controller has reviewed the operations of the R&M department and has concluded that the administrative procedures used since the early days of the department are outmoded due in part to the growth of the company. In the opinion of the assistant controller, the two major causes for the deterioration are an antiquated scheduling system for repair and maintenance work, and the actual cost to distribute the R&M department\’s costs to the production departments. The actual costs of the R&M department are allocated monthly to the production departments on the basis of the number of service calls made during each month.The assistant controller has proposed that a formal work order system be implemented for the R&M department. With the new system, the production departments will submit a service request to the R&M department for the repairs and/or maintenance to be completed, including a suggested time for having the work done. The supervisor of the R&M department will prepare a cost estimate on the service request for the work required (labor and materials) and estimate the amount of time for completing the work on the service request. The R&M supervisor will return the request to the production department that initiated the request. Once the production department approves the work by returning a copy of the service request, the R&M supervisor will prepare a repair and maintenance work order and schedule the job. This work order provides the repair worker with the details of the work to be done and is used to record the actual repair and maintenance hours worked and the materials and supplies used.Production departments will be charged for actual labor hours worked at a predetermined standard rate for the type of work required. Parts and supplies are charged to the production departments at cost. The assistant controller believes that only two documents will be required in this new system—a Repair/Maintenance Service Request initiated by the production departments and a Repair/Maintenance Work Order initiated by the R&M department.
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