SPOILAGE

Spoilage, scrap, evaporation, etc. in the manufacture of products. Natural corruption is inevitable and is part of the cost of producing high-quality output. Abnormal damage is avoidable and is not part of the cost of producing good output. Abnormal damage should be charged when it occurs.

Spoilage is the loss or waste in production. Normal spoilage is expected and included in product cost, while abnormal spoilage is avoidable and expensed when incurred.

- Used in product/service costing, budgeting, and variance analysis.
- Used to support pricing decisions and profitability analysis by cost behavior and drivers.

- Example: The costing team uses **SPOILAGE** to allocate costs and analyze margins by product line.

- Why it matters: Improves cost accuracy, supports better pricing and budgeting, and strengthens performance measurement.