Q3 - Finished Goods or Work in Process depending on where...

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Katrina Rowsey 16 Apr 11 7:21 PM MST Question 2 If normal loss (spoilage) is anticipated on all jobs, the predetermined OH rate should include an amount for the net loss, which equals the cost of defective or spoiled work minus any estimated disposal value of that work. This approach assumes that losses are naturally inherent and unavoidable in the production of goods units, and the estimated loss should be allocated to the good units produced. Hi Katrina, Good post, usually the costs of spoilage is accumulated separately. Then allocate normal spoilage costs to
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Unformatted text preview: Finished Goods or Work in Process, depending on where in the production cycle the spoilage is assumed to have taken place. Spoilage is typically assumed to occur at the stage of completion where inspection takes place, because spoilage is not detected until this point. Normal spoilage need not be allocated to units that have failed to reach this point in the production process, because the spoiled units are related solely to the units that have passed the inspection point. Jack...
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