Normal Spoilage is Planned Spoilage –
Normal spoilage refers to the inherent deterioration of products during the production or inventory processes of the sales sequence. It is very true to say that normal spoilage is planned in advance because efficient production systems always give rise to normal waste or spoilage, a production sequence is incomplete without natural waste happening. Companies normally set a normal spoilage rate for lines of products which they produce and allocate the costs of such spoilage to cost of goods sold. In fact, the production in charge and management even cost for normal spoilage as a % of their cost of production. Normal spoilage is that spoilage that cannot be controlled. It is unavoidable and inherent in the process of production. The cost of the normal spoilage is anticipated hence management understands that no production can be complete without normal spoilage. Management knows that the cost of goods produced is inflated with the cost of normal waste too.
Discussions between production and operations as to the minimal amount that can be set apart for normal waste. Normal spoilage occurs for companies operating in any sort of manufacturing or production environment. So management plans for this too hence it can be said that no production process is complete without this. Whether it is a batch process or a job Process, this sort of spoilage is inherent. Normally management accounts for this in its specific process and makes sure that the amount of spoilage stays within permissible limits. What is normal cannot be avoided and so production cannot carry on without normal spoilage.