1. Chapter 18 Spoilage, Rework and Scrap

2. Spoilage, Reworked Units and Scrap
Unacceptable units of production that are discarded or sold for net disposal proceeds
Reworked units
Unacceptable units of production that are subsequently reworked and sold as acceptable finished goods
Scrap
A product with minimal (frequently zero) sales value
Either account for scrap at the time of production or the time of sale
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3. Types of Spoilage Normal Spoilage
Spoilage that arises under efficient operating conditions as a result of the production process
Management decision as to what is “normal”
Set based on number of good units completed
Allocate normal spoilage to all goods which have passed the inspection point
Abnormal Spoilage
Spoilage that is not expected to arise under efficient operating conditions
Treated as avoidable and controllable
Expense on the income statement when it occurs
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