EXPLAIN spoiled and defective work. Also, EXPLAIN the treatment of defect under the following circumstances: Circumstances Treatment (1) Where a…

Spoiled work is the quantity of production that has been totally rejected and cannot be rectified. Defective work refers to production that is not as perfect as the saleable product but is capable of being rectified and brought to the required degree of perfection provided some additional expenditure is incurred. Circumstances Treatment (1) Where a percentage of defective work is allowed in a particular batch as it cannot be avoided. If the actual number of defectives is within the normal limit or is near thereto the cost of rectification will be charged to the whole job and spread over the entire output of the batch. If, on the other hand, the number of defective units substantially exceeds the normal, the cost of rectification of the number which exceeds the normal will be written off as a loss in the Costing Profit and Loss Account. (2) Where defect is due to bad workmanship. In this case cost of rectification will be abnormal cost, i.e., not a legitimate element of the cost. Therefore, the cost of rectification shall be written off as a loss, unless by an ar- rangement, it is to be recovered as a penalty from the workman concerned. (3) Where defect is due to the Inspection Department wrongly accepting incoming material of poor quality. In this case the cost of rectification will be charged to the department and will not be considered as cost of manufacture of the batch. Being an abnormal cost, it will be written off to the Costing Profit and Loss Account.