Maintenance Costs Versus Responsibility Accounting

Maintenance Costs and Responsibility Accounting. Maintenance expenses like any other indirect factory cost must find their way into the producing departments to be included in the total departmental cost for the calculation of overhead rates for product costing purposes. Still unsolved is the problem of cost responsibility.

The maintenance engineer often believes that his department really incurs no cost at all, for any cost incurrence is for the benefit and at the request of other departments. The factory foreman, on the other hand, may argue that he has no influence upon costs, either personnel or machinery, of the maintenance department.

However, a solution must be found not only for product costing purposes, but also for the control of these expenses. The control is in reality two fold :

(a) the factory foreman controls the amount of maintenance work, while

(b) the maintenance engineer or foreman controls the quantity of men and materials required to serve the various departments.

As maintenance work is done at the request of the production foreman, the problem arises as to whether control should be exercised at the source level or the recipient level.

At the source level, service and maintenance labor is organized and supervised. Control at this point requires the predetermination of man-hour requirements in each of the producing and service departments for each service or maintenance function. At the recipient level, the cost system establishes predetermined budget allowances for this indirect cost. Budget allowances activated against planned levels of production permit determining the man-hour budgets for each shop service or maintenance unit for advance scheduling of its labor force. Planning in advance is the heart of the control, providing an opportunity for corrective action before the hours are worked. Maintenance supervisors and service department foremen are apprised of the budgeted service or maintenance allowance by individual recipient cost centers while the distribution or scheduling of the work itself is left to their discretion.

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