The below mentioned article provides a note on defectives.
Defectives represent the part of production that does not meet dimensional or quality specifications of a product but which can be reworked by additional application of material, labour and/ or processing and made it into saleable condition either on first or seconds depending upon the characteristic of the product.
Causes for Defectives:
The defective will arise due to the following reasons:
(a) Poor quality of material.
(b) Lack of skill or training.
(c) Inadequate supervision.
(d) Damage in material handling.
(e) Defective or improper tooling and equipment.
(f) Deficiencies in production design.
(g) Inadequate inspection.
Classification of Defectives:
The defective can be classified into the following:
(a) Defectives in the raw material stage itself.
(b) Defectives after some stage of processing with some labour and overhead spent on it.
(c) Defective finished goods due to storage for too long a time.
(d) Defective finished goods returned by purchaser not being upto specification or sample.
Accounting of Defective:
The accounting treatment of defectives is as follows:
(i) Normal Defectives- If the defectives are of normal and within the standard limit, any of the following accounting methods are adopted:
(a) The cost of rectification of normal defective is charged to good units.
(b) Where a particular department is identified and responsible for defective work, the rework costs are charged to that department.
(c) Where it cannot be identified from which department the defective caused, then the rework or reprocess costs are to be charged to the general overheads.
(ii) If normal defectives are easily identifiable with specific jobs, the rework costs are debited to that particular job or process.
(iii) If the defectives are of abnormal nature, the rework cost should be charged to the Costing Profit and Loss Account.
Control of Defectives:
For control of defectives requires a basis for evaluation of performance. Standards may be fixed for occurrence of defective work, giving proper weightage to different conditions i.e., nature of material used, workmanship required etc.