Introduction to Financial Markets and Institutions
There are certain types of financial markets and financial institutions that are found in almost every country in the world. For instance, most countries where economic activities take place have an established stock exchange and a banking system. Each of these institutions is different and hence perform different functions. However, together, these financial markets and […]
Is the Lyft IPO Overpriced?
Lyft is one of the most famous tech unicorns in the world. There was tremendous amount of buzz in the market regarding the Lyft IPO. This is the reason that the company has been able to garner a valuation of close to $24 billion. This astronomical valuation is despite the fact that the company has […]
Finance Functions – Investment, Financial, Dividend and Liquidity Decisions
The following explanation will help in understanding each finance function in detail Investment Decision One of the most important finance functions is to intelligently allocate capital to long term assets. This activity is also known as capital budgeting. It is important to allocate capital in those long term assets so as to get maximum yield […]
How a Whatsapp Message Nearly Took Down a Company
Almost everybody knows that Whatsapp messages are often used to spread false information. A lot of times this information is related to politics. During election campaigns, politicians run concerted smear campaigns against their opponents using messaging services like Whatsapp. It is a known fact that in many terrorist attacks, Whatsapp has been used by the […]
The Nordic Crisis of 1992
The Nordic crisis of 1992 refers to the series of bank runs and currency crisis that shook Finland, Sweden as well as Norway in the early 1990’s. This was the first major national banking crisis since the 1930’s (if wars are not taken into account). Thus, an important belief that the fractional reserve banking system […]
Rework is that part of the final produce which has not been accepted by the client because it does not meet the required specifications. However, those specifications can be met by working on the item once again. Hence the name rework.
Spoilage is also that part of the final produce that does not adhere to the specifications given by the client and is therefore not accepted by them.
The difference between rework and spoilage is that, rework will be reworked on and sold at full price whereas spoilage is considered to be defective goods and is discarded at throw away prices in the market.
Rework and spoilage are closely linked concepts. If firms have a high percentage of rework, they will also have a lot of items in their spoilage.
Rework and spoilage are additional cost for the company. Since the company is in the business to make a profit, this gets passed on to the customer in the form of additional costs. This makes the company uncompetitive in comparison to its competitors.
The company with the lowest amount of rework and spoilage costs will have the least loss and hence they will be able to provide the best deal to the customer. Reducing rework and spoilage is therefore strategic in nature and must be paid careful attention to.
Job costing has created a system wherein rework and spoilage costs are allocated to the respective job where the loss is supposed to have occurred. This helps the company find out the types of jobs it is efficient and not efficient in and therefore work on reducing costs:
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