Process Losses
Most manufacturing processes result in several portion of the raw materials utilized not being transformed into a reliable half losses. These losses may take the form of scrap, and rework, waste, and spoilt units.
- Waste: are materials lost in the process that are irrecoverable or have no recoverable value.
- Scrap: Material held after a productive process that are irrecoverable or have no recoverable value.
- Rework: These are finished goods such do not meet quality standards however which along with some additional work can be sold.
- Loss: Refers to finished or partially finished units that cannot be reworked or employed for their intended purpose. They may be discarded or sold for minimal value. There are two kinds of spoilage as;
A. Normal Loss: such is loss unavoidable and expected even beneath the most efficient systems of production. Normal spoilage cost is normally involved in product cost.
B. Abnormal Spoilage: This is loss which is avoidable along with efficient operating conditions. The cost is regarded as controllable and can be eradicated if due supervision and diligence are exercised. The cost is generally treated as a loss and charged to loss and profit account.