Spoilage

Spoilage is waste or scrap arising from the production process. The term is most commonly applied to raw materials that have a short life span, such as food used in the hospitality industry. Normal spoilage is the standard amount of waste or scrap that is caused by production, and which is difficult to avoid. For example, stamping parts out of a sheet of metal will inevitably result in some of the metal being rendered unusable. Abnormal spoilage exceeds the normal or expected rate of spoilage. For example, an overcooked meal cannot be served to a customer, and so is instead classified as abnormal spoilage.

In accounting, normal spoilage is included in the standard cost of goods, while abnormal spoilage is charged to expense as incurred. This means that the cost of normal spoilage may initially be recorded as an asset and then charged to expense in a later period.