Cost Accounting (15th Edition)

Published by Prentice Hall
ISBN 10: 0133428702
ISBN 13: 978-0-13342-870-4

Chapter 18 - Spoilage, Rework, and Scrap - Assignment Material - Questions - Page 726: 18-15

Answer

Managers use scrap information to measure efficiency, control costs, prevent theft, improve processes, and explore scrap utilization opportunities.

Work Step by Step

Managers use information about scrap in several ways: 1. Efficiency Measurement: Scrap data is used to measure the efficiency of the production process. High levels of scrap can indicate inefficiencies in production or quality control. 2. Cost Control: Scrap represents a cost to the company, both in terms of the material wasted and the cost of disposing of it. Managers use this information to control costs by identifying areas where scrap can be reduced. 3. Theft Prevention: Scrap can be a tempting source of theft or misappropriation. Managers use scrap information to ensure that scrap materials are properly accounted for and not misused. 4. Process Improvement: Companies with high scrap levels often focus on process improvement. Managers may redesign products and processes to reduce scrap, leading to cost savings and increased efficiency.
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