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Question 2 (Jan 2019 Question 2) RIS Watch Limited manufactures wrist watches for various brands. The company designs and assembles products according to customers' specifications, which may include alarms, straps or other electronic and aesthetic functions. RIS uses normal costing to cost its job orders and applies plant-wide manufacturing overhead (MOH) based on direct labour hours (DLH). Over or under-applied overhead is closed to Cost of Goods Sold (COGS) annually on 31st December. RIS sells its products on fixed price or on cost plus basis. The watches are designed in the Design Department with computer-aided design software using a state of the art machine. 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. Required (a) Using your knowledge of organisational architecture, discuss if RIS should change the incentive scheme for designers. Give reasons to support your recommendation. (b) The designers' incentive payments are treated as period expenses. Discuss the appropriateness of this accounting treatment in relation to determining product costs

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