Courses

# PPT - Spoilage and Scrap B Com Notes | EduRev

## B Com : PPT - Spoilage and Scrap B Com Notes | EduRev

``` Page 1

TREATMENT OF WASTE SCRAP  and
SPOILAGE
IN COSTING
Page 2

TREATMENT OF WASTE SCRAP  and
SPOILAGE
IN COSTING
TREATMENT IN COSTING
I. Waste
II. Scrap
III. Defectives
IV. Spoilage
W A S T E
? “Discarded substances having no values”
? Inevitable in certain, Loss of material due to nature of process
Two types of wastes –
Normal and
Abnormal Waste
? Normal waste is the unavoidable loss on account of the nature of material
? No value and the loss of material is recorded in quantitative terms only
? Cost per unit is found out after deducting the quantity of waste
Page 3

TREATMENT OF WASTE SCRAP  and
SPOILAGE
IN COSTING
TREATMENT IN COSTING
I. Waste
II. Scrap
III. Defectives
IV. Spoilage
W A S T E
? “Discarded substances having no values”
? Inevitable in certain, Loss of material due to nature of process
Two types of wastes –
Normal and
Abnormal Waste
? Normal waste is the unavoidable loss on account of the nature of material
? No value and the loss of material is recorded in quantitative terms only
? Cost per unit is found out after deducting the quantity of waste
Eg:- Purchased 2000 units of material for Rs. 13300.
Experience shows that 5% of material will be lost
during the production process. Calculate per unit
cost of material
Actual output 2000 units -100 units (2000x5%)
= 1900 units
Per unit cost of materials = 13300/ 1900 = Rs. 7
The cost of waste is recovered from good output.
According to costing principles all normal
expenses should be included in the cost of
production
Thus, if, there is normal waste, the materials are
issued at inflated prices
Page 4

TREATMENT OF WASTE SCRAP  and
SPOILAGE
IN COSTING
TREATMENT IN COSTING
I. Waste
II. Scrap
III. Defectives
IV. Spoilage
W A S T E
? “Discarded substances having no values”
? Inevitable in certain, Loss of material due to nature of process
Two types of wastes –
Normal and
Abnormal Waste
? Normal waste is the unavoidable loss on account of the nature of material
? No value and the loss of material is recorded in quantitative terms only
? Cost per unit is found out after deducting the quantity of waste
Eg:- Purchased 2000 units of material for Rs. 13300.
Experience shows that 5% of material will be lost
during the production process. Calculate per unit
cost of material
Actual output 2000 units -100 units (2000x5%)
= 1900 units
Per unit cost of materials = 13300/ 1900 = Rs. 7
The cost of waste is recovered from good output.
According to costing principles all normal
expenses should be included in the cost of
production
Thus, if, there is normal waste, the materials are
issued at inflated prices
Abnormal Waste
“Any loss caused by unexpected or abnormal conditions such as sub-
standard materials, carelessness, accident etc”
Or “loss in excess of the margin anticipated for normal process loss”
The value of abnormal waste is to be calculated and should be
transferred to Costing Profit and Loss Account.  It does not form
part of cost of Production
Value of abnormal waste =
In our above example, assume actual production was only 1850 units,
in this case, there is an abnormal waste of 50 units its value will be
Actual production will be 1850 units and Total Cost of Production will
be 13300-350 = 12950
Page 5

TREATMENT OF WASTE SCRAP  and
SPOILAGE
IN COSTING
TREATMENT IN COSTING
I. Waste
II. Scrap
III. Defectives
IV. Spoilage
W A S T E
? “Discarded substances having no values”
? Inevitable in certain, Loss of material due to nature of process
Two types of wastes –
Normal and
Abnormal Waste
? Normal waste is the unavoidable loss on account of the nature of material
? No value and the loss of material is recorded in quantitative terms only
? Cost per unit is found out after deducting the quantity of waste
Eg:- Purchased 2000 units of material for Rs. 13300.
Experience shows that 5% of material will be lost
during the production process. Calculate per unit
cost of material
Actual output 2000 units -100 units (2000x5%)
= 1900 units
Per unit cost of materials = 13300/ 1900 = Rs. 7
The cost of waste is recovered from good output.
According to costing principles all normal
expenses should be included in the cost of
production
Thus, if, there is normal waste, the materials are
issued at inflated prices
Abnormal Waste
“Any loss caused by unexpected or abnormal conditions such as sub-
standard materials, carelessness, accident etc”
Or “loss in excess of the margin anticipated for normal process loss”
The value of abnormal waste is to be calculated and should be
transferred to Costing Profit and Loss Account.  It does not form
part of cost of Production
Value of abnormal waste =
In our above example, assume actual production was only 1850 units,
in this case, there is an abnormal waste of 50 units its value will be
Actual production will be 1850 units and Total Cost of Production will
be 13300-350 = 12950
II . SCRAP
• Refers to discarded materials having some value.
• Represents fragments or remnants of material that are left
from certain type of manufacture.
• A material loss but small value without further processing.
• Scrap is physically available unlike waste which may or may
not be physically present in the form of residue, thus, it is
always visible.  Further, may not have value also.
Types of Scrap
1. Legitimate scrap
3. Defective scrap
```
Offer running on EduRev: Apply code STAYHOME200 to get INR 200 off on our premium plan EduRev Infinity!

## Cost Accounting

131 videos|139 docs

,

,

,

,

,

,

,

,

,

,

,

,

,

,

,

,

,

,

,

,

,

;