PC With Spoilage Rework

8/10/2019 PC With Spoilage Rework

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Compliance Non-ComplianceCosts Costs

Prevention Appraisal Internal External Spoilage Rework

FC

1


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2


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Normal [Expected] AbnormalSpoilage Spoilage

Difference betweenactual & normal

spoilage

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AS NS AS NS

LOSS GAIN

4


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Spoilage

Ins pt before Ins ptE WIP % after E WIP %

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COG E WIPCompleted

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Allocate NS

Only to COG completed

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0% 100%

B ESNS AS

C

Good

Spoiled

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DM DL CCCompletedNS

ANSE WIP

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Cost DM DL CCB WIPCURRENT

COST TO a/c for

Calculate the cost per E.U?Prepare the cost distribution

schedule.

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Normal [Expected] AbnormalRework Rework

Difference betweenactual & normal

rework

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AR NR AR NR

LOSS GAIN

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Rework

Ins pt before Ins ptE WIP % after E WIP %

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COG E WIPCompleted

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Allocate NR

Only to COG completed

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0% 100%

B ES

C

Calculate normal reworked units.Determine actual reworked units.Compute abnormal reworked units, if any.

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DM DL CCCompletedNR

ANRE WIP

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In relation to Spoilage [Refer to slides 2 11]: How much is actual spoilage, in units? What % and activity volume is used to express

normal spoilage? How much is abnormal spoilage?

How is abnormal spoilage treated? How is normal spoilage allocated to the cost of

production?Dependent on where Ending WIP inventory %completion lies in relation to the Spoilage Inspection

Point.If E WIP % is beyond Spoilage Ins Pt NS allocated to COGcompleted & E WIPIf E WIP % is before Spoilage Ins Pt NS allocated to COGcompleted only

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In relation to Rework [Refer to slides 14 23]: How much is actual reworked units? What % and activity volume is used to express

normal rework? How much is abnormal rework?

How is abnormal rework treated? How is normal rework allocated to the cost of

production?Dependent on where Ending WIP inventory %completion lies in relation to the Rework Inspection

Point.If E WIP % is beyond Rework Ins Pt NS allocated to COGcompleted & E WIPIf E WIP % is before Rework Ins Pt NS allocated to COGcompleted only

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In relation to both Spoilage & Rework: Where does the Rework Inspection Point lie in

relation to the Spoilage Inspection Point?

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RW

Ins Pt

RW

Ins Pt

SP

Ins Pt

SP

Ins Pt

Where to allocate costs of NR?


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NS AS

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COGCompleted E WIP

NR is now allocatedin 4 ways: NS

AS


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COGCompletedR is now allocated

in 3 ways:

NS AS


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DO NOTAllocate NS

toNR & AR

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COG E WIPCompleted

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Allocation of NS


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0% 100%

B ES

RWBAL

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G

S

RW

Determine actual reworked units.Calculate normal reworked units.

Compute abnormal reworked units, if any.

Determine good units.Calculate normal spoilage.Compute abnormal spoilage, if any.


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DM DL CCCompletedNS

ANSNRANRE WIP

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Cost DM DL CCB WIPCURRENT

COST TO a/c for

Calculate the cost per E.U?Prepare the cost distribution

schedule.

PC With Spoilage Rework

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