PPT - Spoilage and Scrap B Com Notes | EduRev

Cost Accounting

Created by: Universal Academy

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
2. Administrative scrap
3. Defective scrap
Read More

Dynamic Test

Content Category

Related Searches

Semester Notes

,

Previous Year Questions with Solutions

,

Viva Questions

,

Important questions

,

shortcuts and tricks

,

video lectures

,

PPT - Spoilage and Scrap B Com Notes | EduRev

,

ppt

,

pdf

,

Objective type Questions

,

Sample Paper

,

PPT - Spoilage and Scrap B Com Notes | EduRev

,

MCQs

,

Free

,

Exam

,

mock tests for examination

,

Extra Questions

,

past year papers

,

study material

,

practice quizzes

,

Summary

,

PPT - Spoilage and Scrap B Com Notes | EduRev

;