It is unlikely that scrap material will improve by itself in quality regardless of the transition time between storage, re-use or sale. Hence assigning of general ledger value to scrap or surplus production materials on the spot at post-production is at the least baffling.
Assigning value at the time and point of sale is prudent as it captures the surplus’s current usefulness and market value, dependent on current product demand, production and operational cost. If cost functions are a reflection of cost fluctuations –over time- and incidental events “effecting” such changes, then cost functions are not static and require continuous assessment and refinement.
Manufacturing or project cost estimates can fluctuate and result in shifting patterns, matching more cost to less produced volumes, if variable costs inflate or more volumes and units with a static cost are produced, budgeting considerations will dictate that costing requires additional attention. Costs can vary during product learning curves and become lower when learning is complete, and production elements become predictable.
Even when some scraps are useful for multiple products as in a hybrid costing system of say; job costing mixed with process costing, the budget considerations cannot afford to ignore scrap material relevancy regarding cost, time, available process improvements and regulatory considerations that may affect revenue and profit.
