Abnormal spoilage is spoilage that is not inherent in a particular production process and would not arise under efficient operating conditions. At Mendoza, the 100 units spoiled due to machine breakdowns and operator errors are abnormal spoilage. Abnormal spoilage is regarded as avoidable and controllable. Line operators and other plant personnel generally can decrease or eliminate abnormal spoilage by identifying the reasons for machine breakdowns, operator errors, and so forth, and by taking steps to prevent them from recurring. To highlight abnormal spoilage costs, companies record the cost of abnormal spoilage in a Loss from Abnormal Spoilage account, which appears as a separate line item in the income statement. That is, unlike normal spoilage, the costs of abnormal spoilage are not considered inventoriable and are written off as a period expense. At Mendoza, the loss from abnormal spoilage is
Issues about accounting for spoilage arise in both process-costing and job-costing systems. We discuss both instances next, beginning with spoilage in process costing.