Definition: Normal spoilage is the standard amount of waste that is a result of the production of a product.
What Does Normal Spoilage Mean?
What is the definition of normal spoilage? Normal spoilage is almost inevitable when manufacturing any kind of product, even in the best circumstances. There will be some sort of spoilage when producing items because there are so many variables that go into production (machines or human error, transportation, etc.) that cannot be controlled.
This can also occur in retail sales as well, such as a grocery store that sells fruit and vegetables. Normal spoilages must be accounted for because they are costs that are associate with producing items, therefore they are applied to the items produced in the cost of goods manufactured.
Let’s look at an example.
Example
Jane owns her own company called JDesign. JDesign manufactures and sells decorative wooden or metal signs. These signs are made up of a wooden plank or sheet of metal, vinyl lettering and an acrylic coating. Of course the machines would not be able to use every bit of the wood that the plank is being cut from, and the same goes for the sheet of metal, the vinyl lettering is cut from a sheet as well, so there will be spoilage of that as well and the acrylic coating would yield less spoilage than the other materials. Jane calculates spoilage after the signs are produced because there are signs that have split or have other flaws that would make them spoilage as well.
For the wooden signs, she has determined that the rate of spoilage is .2% and for metal signs .3%. If Jane produces 12,000 wooden signs and 15,000 metal signs she would have spoilage of 24 wooden signs and 45 metal signs. Should would use these figures to account for her spoilage in the cost of goods manufactured. If Jane finds that the spoilage is greater than the percentages she has predetermined, her equipment is not operating efficiently or there are other issues she would need to look into.
Summary Definition
Define Normal Spoilage: Normal spoilage means the expected or typical amount of waste that happens due to a product being made.
