Abnormal spoilage

Abnormal spoilage,

Definition of Abnormal spoilage:

  1. When a loss of inventory occurs during manufacturing processes. For example, toys that should have been coated with a blue paint instead had red paint applied to them by a factory machine.

  2. Abnormal spoilage is the amount of waste or destruction of inventory beyond what is expected in normal business processes. Abnormal spoilage can be the result of broken machinery or from inefficient operations, and is considered to be at least partially preventable. In accounting, abnormal spoilage, an expense item, is recorded separately from normal spoilage on internal books.

  3. Material spoilage is often discovered during the inspection and quality control process. In job costing, spoilage can be assigned to specific jobs or units, or can be assigned to all jobs associated with production as part of the overall overhead. Normal spoilage is just that — normal — and is expected in the ordinary course of manufacturing or business operations, especially for companies that make or handle perishable products (i.e. food and beverage). Spoilage beyond what is historically standard or expected is considered abnormal spoilage. Insurance companies that specialize in underwriting policies for firms with spoilage risks can help mitigate losses incurred from spoilage, but typically up to certain limits, which means that abnormal spoilage will probably not be covered.

Meaning of Abnormal spoilage & Abnormal spoilage Definition