What a Waste! Getting the Most from Spoilage, Scrap, and Reworked Products
In This Chapter
Understanding the differences among spoilage, rework, and scrap
Gauging the impact of spoilage
Changing process costing totals due to spoilage
Analyzing job costing for spoilage costs
Reworking products and selling scrap
Spoilage is a term that describes units you produce that don’t meet your production standards. There may be defects (errors) in production, or in the case of food, at some point in time the product will no longer be wholesome. Either way, you won’t be able to sell substandard units to customers.
No production process is perfect. Every manufacturer ends production with stuff that’s left over and not used. Accountants refer to leftover material with a low sales value as scrap.
Sometimes, you can repair a defective product so it meets your production standards. At that point, you can sell it to a customer. Those units are considered reworked.
No production process “works” ...