Spoilage, Rework, and Scrap
CHAPTER 18
SPOILAGE, REWORK, AND SCRAP
18-1 Managers have found that improved quality and intolerance for high spoilage have lowered overall costs and increased sales.
18-2 Spoilage—units of production that do not meet the standards required by customers for good units and that are discarded or sold at reduced prices. Rework—units of production that do not meet the specifications required by customers but which are subsequently repaired and sold as good finished units. Scrap—residual material that results from manufacturing a product. It has low total sales value compared to the total sales value of the product.
18-3 Yes. Normal spoilage is spoilage inherent in a particular production process that arises even under efficient operating conditions. Management decides the spoilage rate it considers normal depending on the production process.
18-4 Abnormal spoilage is spoilage that is not inherent in a particular production process and would not arise under efficient operating conditions. Costs of abnormal spoilage are “lost costs,” measures of inefficiency that should be written off directly as losses for the accounting period.
18-5 Management effort can affect the spoilage rate. Many companies are relentlessly reducing their rates of normal spoilage, spurred on by competitors who, likewise, are continuously reducing costs.
18-6 Normal spoilage typically is expressed as a percentage of good units passing the inspection point. Given actual spoiled units, we infer abnormal spoilage as follows: Abnormal spoilage = Actual spoilage – Normal spoilage
18-7 Accounting for spoiled goods deals with cost assignment, rather than with cost incurrence, because the existence of spoiled goods does not involve any additional cost beyond the amount already incurred.
18-8 Yes. Normal spoilage rates should be computed from the good output or from the normal input, not the total input. Normal spoilage is a given percentage of a certain output base. This
SPOILAGE, REWORK, AND SCRAP
18-1 Managers have found that improved quality and intolerance for high spoilage have lowered overall costs and increased sales.
18-2 Spoilage—units of production that do not meet the standards required by customers for good units and that are discarded or sold at reduced prices. Rework—units of production that do not meet the specifications required by customers but which are subsequently repaired and sold as good finished units. Scrap—residual material that results from manufacturing a product. It has low total sales value compared to the total sales value of the product.
18-3 Yes. Normal spoilage is spoilage inherent in a particular production process that arises even under efficient operating conditions. Management decides the spoilage rate it considers normal depending on the production process.
18-4 Abnormal spoilage is spoilage that is not inherent in a particular production process and would not arise under efficient operating conditions. Costs of abnormal spoilage are “lost costs,” measures of inefficiency that should be written off directly as losses for the accounting period.
18-5 Management effort can affect the spoilage rate. Many companies are relentlessly reducing their rates of normal spoilage, spurred on by competitors who, likewise, are continuously reducing costs.
18-6 Normal spoilage typically is expressed as a percentage of good units passing the inspection point. Given actual spoiled units, we infer abnormal spoilage as follows: Abnormal spoilage = Actual spoilage – Normal spoilage
18-7 Accounting for spoiled goods deals with cost assignment, rather than with cost incurrence, because the existence of spoiled goods does not involve any additional cost beyond the amount already incurred.
18-8 Yes. Normal spoilage rates should be computed from the good output or from the normal input, not the total input. Normal spoilage is a given percentage of a certain output base. This