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Introduction
In the process of procuring ,storing and
SCRAP
It is that part of raw material , which is
SCRAP
Defectives
Defective is that part of finished output which has
Defectives
Defective units are those units on which an
charged to overheads.
However if it can be identified with he
product then the same may be charged to
the product directly.
Spoilage
Is that of finished output which has not come up to specification
Accounting treatment
Obsolesce
Loss in the value of the asset due to
Terms
Waste
Scrap
Spoilage
Definition
Unusable materials having little or no value.
Nowadays, with good technology, companies can convert
waste into useful and saleable products. Example of such
conversion is the waste into fertilizers.
Materials that cannot be used for its original purpose
Difference between scrap and by-products are:
By-products have greater sale value than scrap
By-products are often processed further to make it saleable
while scrap is usually sold on an as is where is basis.
Those that cannot be used for its intended purpose.
A form of waste.
Arises due to inefficient production, poor workmanship, poor
material, etc.
The cost of spoilage comprise material, labor and overheads at
the point of defects.
Either additional cost are incur in rectifying the spoilt work or in
converting the spoilt work into new products.
Obsolescence
Rejects
Stock Losses
production process and usually means to refer that input has been lost due
to any reason either because of its nature of the material itself, nature of the
process or some other conditions. Sometimes such output that does not
have any sales or use is also referred as waste.
For example in paint industry many chemical are used that are volatile i.e.
can evaporate at room temperature. Another example can be of break-oil
which is wasted in the process named bleeding in which air bubbles are
removed from the pressure pipes so that hydraulics can work effectively.
Scrap: This is a loss connected with the output. Most of the time at the end
of production/conversion process such outputs are generated that were not
intended but cannot be eliminated due the nature of material or process
itself. Usually they are of no to insignificant value as compared to the main
product that was intended. We usually know them with the term byproducts. This is considered as loss as not all of the raw material is
converted into intended product.
For example in furniture manufacturing chippings of wood and sawdust is a
common example. Another very known example is of gold dust in jewellery
and gold industry.
Spoil: This is also a loss connected with the output. In the production process if the
output is produced which is not up to the quality standard due to any problem and
now the product cannot be brought back in good state even after further processing
or reprocessing or it is simply not feasible to do so then such output is called spoil or
spoiled output or spoilage. This is considered as loss as it is such finished good which
is not worthy of sale and thus cannot generate intended revenue.
For example in fashion and clothing industry many of the well known brands have
strict quality standards which if not met then product is not considered to be worthy
to a regular retail outlet and is most of the time shredded or sold as B pair or
seconds.
Defect: This is another type of loss connected with the output but it can be in the
input as well. This is close to waste but with the difference that it is such output
which does not qualify all the quality standards due to some problem but that
problem CAN be fixed by further processing or reprocessing and it is also feasible to
do so. This is considered as loss as more then normal effort will be required to bring
the goods into saleable condition.
For example in juice manufacturing industry where juice is not sweat up to a required
level or is not homogenized to give a required molecular level thus not consistent
enough. Another example can be car repair and maintenance where sometimes paint
dries too quickly thus not giving proper shine and will have to be touched again.