The level of normal spoilage is something that occurs naturally in the production process, but abnormal spoilage should occur only if something unusual occurs. Therefore, production management should be able to reduce abnormal spoilage through proper monitoring of the process to detect and correct abnormal problems before they lead to abnormal spoilage.
Abnormal spoilage is expensed on the income statement, and normal spoilage is added to the costs of the good units produced. There is a difference in the treatment of the costs of spoilage.
Since abnormal spoilage is the spoilage that is in excess of the expected spoilage, normal spoilage will occur more often than abnormal spoilage.
Since abnormal spoilage is the spoilage in excess of the expected spoilage, tighter standards will cause there to be more abnormal spoilage. This is because with tight standards, fewer units will be expected to be spoiled normally.
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