Fully or partially completed products that fail to meet quality standards and are sold at a discount or thrown away are called ____________?
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Answer: A. spoilage
Explanation
Spoilage refers to units of production that either fail to meet quality standards and must be discarded or sold at a reduced price. These imperfect units represent a loss of material and conversion effort in the manufacturing process. Managing spoilage is essential for minimizing factory waste. Production processes often generate defective units due to machine error or substandard raw materials. Spoilage is categorized as either normal, which is inherent to the process, or abnormal, which is preventable. Proper accounting ensures these defective units are tracked and valued correctly.
Factory managers monitor spoilage rates to detect equipment breakdowns and improve worker training. Minimizing spoilage reduces the cost of goods manufactured and protects profitability. It is a central focus of total quality management and cost control programs. Rework refers to defective units that are successfully repaired and sold as good products. Scrap is residual material with minor net realizable value resulting from manufacturing. Equivalence is not a spoilage term.
- Subject
- Accounting and Finance
- Category
- Accounting
- Topic
- —
- Difficulty
- medium
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