AFM481 Chapter 18: Chapter 18

• School: University of Waterloo
• Department: Accounting & Financial Management
• Course: AFM481
• Professor: Grant Russell

Document Summary

Spoilage: output that fails to attain a specified performance level or standard of composition. Rework: conversion of production rejects into reusable products of the same or lower quality. Scrap: residual material that results from manufacturing a product: minimal total sales value compared to the total sales value of the product. Normal spoilage: arises under efficient operating conditions as a result of predictable rates of failure in a production process. Locked in cost, managers accept when they invest in equipment with a specific failure rate: not controllable or avoidable, can be included in cogm, transferred to cogs, computed with total good units completed as the base. Abnormal spoilage: unexpected under efficient operating conditions but regarded as controllable and avoidable: written off as losses of the accounting period in which detection occurs. Spoilage in process costing using weighted-average and fifo: count all spoilage.