# Definition of __Spoilage, normal__

## Spoilage, normal

The amount of **spoilage** that naturally arises as part of a production

process, no matter how efficient that process may be.

# Related Terms:

the cost of spoiled work less the estimated disposal value of that work

**spoilage** that has been planned or foreseen; is a product cost

**spoilage** arising from the production process that exceeds the **normal**

or expected rate of **spoilage**. Since it is not a recurring or expected cost of ongoing

production, it is expensed to the current period.

Part of the return that is not due to systematic influences (market wide influences). In

other words, ab**normal** returns are above those predicted by the market movement alone. Related: excess

returns.

a measure used in academic finance articles to measure the excess returns an investor would have received over a particular time period if he or she were invested in a particular stock.

This is typically used in control and takeover studies, where stockholders are paid a premium for being taken over. Starting some time period before the takeover (often five days before the first announced bid, but sometimes a longer period), the researchers calculate the actual daily stock returns for the target firm and subtract out the expected market returns (usually calculated using the firm’s beta and applying it to overall market movements during the time period under observation).

The excess actual return over the capital asset pricing model-determined expected return market is called an ‘‘ab**normal** return.’’ The cumulation of the daily ab**normal** returns over the time period under observation is the CAR. The term CAR(-5, 0) means the CAR calculated from five days before the

announcement to the day of announcement. The CAR(-1, 0) is a control premium, although Mergerstat generally uses the stock price five days before announcement rather than one day before announcement as the denominator in its control premium calculation. However, the CAR for any period other than (-1, 0) is not mathematically equivalent to a control premium.

Sum of the differences between the expected return on a stock and the

actual return that comes from the release of news to the market.

A distribution where the logarithm of the variable follows a **normal** distribution.

Log**normal** distributions are used to describe returns calculated over periods of a year or more.

The manner in which retirement benefits are paid out.

Holds that the futures price will be bid down to a level below the expected

spot price.

In statistics, a theoretical frequency

distribution for a set of variable data, usually represented by a bell-shaped

curve symmetrical about the mean.

the long-run (5–10 years) average production

or service volume of a firm; it takes into consideration

cyclical and seasonal fluctuations

a valuation method that uses actual

costs of direct material and direct labor in conjunction with

a predetermined overhead rate or rates in determining the

cost of Work in Process Inventory

Related: standardized value

an expected decline in units during the production process

A customized benchmark that includes all the securities from which a manager **normal**ly

chooses, weighted as the manager would weight them in a portfolio.

## Normal probability distribution

A probability distribution for a continuous random variable that is forms a

symmetrical bell-shaped curve around the mean.

## Normal random variable

A random variable that has a **normal** probability distribution.

## Normalizing method

The practice of making a charge in the income account equivalent to the tax savings

realized through the use of different depreciation methods for shareholder and income tax purposes, thus

washing out the benefits of the tax savings reported as final net income to shareholders.

## Standardized normal distribution

A **normal** distribution with a mean of 0 and a standard deviation of 1.

## method of neglect

a method of treating spoiled units in the

equivalent units schedule as if those units did not occur;

it is used for continuous **normal spoilage**

## Product cost

The total of all costs assigned to a product, typically including direct

labor, materials (with **normal spoilage** included), and overhead.

**Related to : financial, finance, business, accounting, payroll, inventory, investment, money, inventory control, stock trading, financial advisor, tax advisor, credit.**