Process Costing: A Note on Costing Normal and Abnormal Spoilage

• In Event: Management Accounting

Abstract

Costing normal and abnormal spoilage is not always as clear-cut as it may first appear. One question that might arise focuses on the cost assigned to a unit of abnormal spoilage – Why might it be less than the cost assigned to a “good” unit produced? A second question concerns the possibility of treating normal spoilage as a fixed number of units per batch rather than as a fixed percentage of “good” units produced. This also allows for the possibility (not usually considered in textbooks) that abnormal spoilage could relate to units that would otherwise have been 100 percent “good” units produced. A third question involves the treatment of normal and abnormal spoilage in a quality control “zero defects” environment. A final question addresses the flipside of abnormal spoilage and asks about the consequences of having normal spoilage that is actually less than a “normal” predetermined level.

Author

• Bill Pollard, Appalachian State University