The spoilage that is not expected to arise under normal operating conditions is called abnormal spoilage. It is the amount of inventory wastage resulting from defective machinery, low-quality materials, or mistakes in operation. Abnormal spoilage is also known as avoidable and unanticipated spoilage. A good example of abnormal spoilage would be the loss of inventory due to a broken freezer in a supermarket or hot weather outside during shipping. The less product we lose, the more profitable we become. Normal spoilage refers to the loss of inventory that occurs naturally due to—for example—aging, evaporation, or natural contamination. Abnormal spoilage refers to the loss of inventory that arises from factors such as damage or malfunctioning machinery, poor quality materials used in production, or mishandling from the operational side. There are a number of reasons why abnormal spoilage might occur. Some of the reasons could be: A machine breakdown leading to loss of product happens especially in the case of food processing. Machine wear and tear (for example, the cutting blades on a meat slicer) can also result in abnormal spoilage. The consumer might not be pleased with the quality of the final output. It could be due to chemicals used during growing or processing; these chemicals are allowed for use only up to a certain limit, but they may have been overused. For instance, too much calcium content can affect how well a biscuit crumbles compared to a normal one. Ruining a batch this way means that you have lost your entire inventory of that item, which will then lead to abnormal spoilage. Temperature fluctuations during storage and transportation may cause the product to spoil faster than it should have. For example, if you are shipping perishable items that are sensitive to heat, then your shipment will require special treatment by carriers—careful packaging and temperature control—to ensure that they arrive at the intended destination without spoiling. If not handled properly, this will lead to abnormal spoilage, which can substantially increase both the cost and time associated with transportation for perishables such as meat and dairy products. Abnormal spoilage is simply any amount in excess of the calculated normal spoilage. While normal spoilage is included as a portion of cost of goods sold, abnormal spoilage will be reflected as an expense as it is incurred. Regularly checking for abnormally high spoilage can help you to take corrective actions before irreparable damage is done. It is also an indicator of potential dangers that could be looming around the corner and can offer a means to address these problems early. Abnormal spoilage can be reduced by implementing best practices during production. Here are some helpful guidelines for maintaining good product quality which will also reduce the risk of abnormal spoilage: By using top-quality raw materials, you will ensure the quality and consistency of your final output and also avoid having to throw away a batch due to low-quality input materials. A machine that sits idle most of the time is more likely to break down than when it is used frequently—leading to abnormal spoilage as well as lost profits (because now you won’t be able to produce as many units as you expected). Doing so will allow you to completely remove any risk of mistakes made by workers during the manufacturing process—which would otherwise lead to abnormal spoilage. This is especially important for perishable goods such as dairy and meat products which require special packaging and temperature control management from carriers in order to avoid damage from environmental conditions during transit. Inventory loss due to factors beyond your control can have grave effects on business operations, so it’s essential to keep a keen eye on spoilage levels in your operations. Spoilages can be divided between “normal” and “abnormal,” with the latter being a measure of any amount in excess of the calculated level. An abnormal loss will have a negative impact on a business’s income statement as it is recognized as an expense, while normal spoilage will be reflected in the cost of goods sold. To reduce the risk of abnormal spoilage, prioritize product quality by using high-quality ingredients and equipment that can handle heavy use without wearing out quickly. By following these guidelines, you’ll ensure the consistent output of your products and avoid having to throw away batches due to low-quality input materials or machine malfunctions—which may lead to significant abnormal spoilage. Finally, keep a close eye on inventory levels and transport temperatures to avoid unforeseen losses from factors beyond your control. Spoilage can be a big deal depending on the types of products you make or sell. Thus, it’s important to know how to calculate them as well as how to avoid spoilage in the future.What Is Abnormal Spoilage?
Normal vs Abnormal Spoilage
Some Causes for Abnormal Spoilage
Machine Breakdown
Low-Quality Raw Materials or Products
Improper Storage Conditions
How to Calculate Spoilage
Normal Spoilage
The normal spoilage is calculated as the total number of spoiled units, divided by the total units produced, and multiplied by 100.
Abnormal Spoilage
What Is the Accounting Treatment for Abnormal Spoilage?
Why Should Businesses Pay Attention to Spoilages?
How to Avoid and Reduce Spoilage
1. Use High-Quality Raw Materials and Ingredients to Make Your Products.
2. Invest in High-Capacity Machinery That Can Handle Heavy Use Without Wearing Out Too Quickly.
3. If Possible, Use Automated Machinery That Runs Without Human Intervention for High-Volume Production.
4. Keep a Watch on Transport Temperatures if Your Products Are Sensitive to Heat or Cold Outside of Their Optimal Range.
Ending Statement
Abnormal Spoilage FAQs
Abnormal spoilage is the loss of materials or finished goods due to causes outside the normal production process, such as improper handling or storage, accidents, and theft.
Preventing abnormal spoilage requires proper handling and storage of materials and finished goods, regular checks of inventory to identify any discrepancies, adequate security measures to prevent theft and accidents, and a thorough understanding of the production process.
The cost of abnormal spoilage includes the cost of raw materials, labor costs associated with replacing or repairing damaged goods, and any lost profits due to an inability to sell or use the affected goods.
Abnormal spoilage is usually recorded as a loss in the company’s income statement and can be offset against gross sales or the cost of goods sold.
Common causes of abnormal spoilage include improper handling or storage, theft, accidents, defective materials and processes, human error, and natural disasters.
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.
To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.
