Defective Unit Treatment In Cost Accounting.

Defective units are those units that do not meet quality standards but can be rectified and sold either as firsts or seconds. Rectification should only be undertaken if incremental revenue is expected to exceed incremental costs. The costs of rectification should normally be charged to the departmental factor)’ overhead account and thus spread over all the production for the period. Let us assume for example, that out of an order of 100 units, 10 are found to be defective. The original cost accumulations were £1000, and the cost of rectification is £100. The accounting entries would be as follows:

decisive units

 

These are imperfect products that can be adjusted to production standards or requirements by applying additional material or labor, or both at the same time. Defective production can be the result of various causes, such as poor quality of materials, incompetent inspection, negligent planning, poor quality of workmanship, inadequate machinery, etc. In order to be classified as defective works, the products must accept the application of labor, materials and additional factory services, in order to bring them to the desired point of perfection.

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