Q2 - Hi Linda if the defective units arise from the...

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Linda McMahon 14 Apr 11 7:10 PM MST Professor and Class, If normal spoilage is generally anticipated to occur on all jobs, how should the cost of that spoilage be treated? Spoilage is when a product cannot be reworked. Normal loss or normal spoilage is an amount that a company factors that will be expected to be a loss. When predetermine OH cost is determine the estimate amount of normal spoilage is factored into this cost. When normal spoilage occurs the cost of the defective product minus the disposal value would equal net net spoilage.
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Unformatted text preview: Hi Linda, if the defective units arise from the production process for the specific job (higher quality standards, lower tolerances, etc.), the cost to rework the defective units is not included in the pre-determined overhead rate; therefore, the cost to rework the defective units is added to the work in process account so that the specific job is charged the cost to rework the defective units. Abnormal Spoilage is the cost to rework the abnormal defective units and is treated as an expense for the period. Good post! Jack...
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