BOP Program Statement 8510.03 § 11

defective work is an important element of the production planning

and control system. Most manufacturing processes generate some

bad units along with acceptable units as an unavoidable or

inherent result of production.

The reason for these losses is to be identified in accordance

with the Quality Assurance Manual and every effort made to keep

the cost of defective work as low as practicable through:

— improvements in operating procedures,

— changes in machine design, or

— use of different material, etc.

The Factory Manager must monitor and control the occurrence of

defective work within predetermined limits.

— Rework of defective work is to be accomplished only when

rework is more economically advantageous than salvage.

— When the costs of rework or replacing the defective work are

expected to be significant as determined in the Quality

Assurance Manual, the Quality Assurance Manager must

initiate a Defective Work/Scrap Report (FPI Form 31)

available on BOPDOCS.

The definition of defective work or abnormal scrap can vary

between products and factories. Therefore, determination is a

matter of judgment but materiality is the key factor.

— The Quality Assurance Manager must develop guidelines for

each product line in the factory defining the thresholds at

which a Defective Work/Scrap Report is to be initiated.

PS 8510.03

7/31/2003

Page 10

a. While a job is in production, capturing rework cost is

accomplished by issuing overages of required material to the job.

These additional material costs should be reflected on the Job

Cost Variance Report.

If an FPI Form 31 is not generated for the additional material,

the overage in material cost should be charged to the Planned

Cost Variation Account.

b. If the rework cost is significant or abnormal as defined by

the Quality Assurance Manager and the job remains open, the

abnormal cost must be reported on FPI Form 31.

c. When rework is significant and the job has been closed, the

abnormal cost must be reported on FPI Form 31. This form must be

submitted to the Business Manager for preparing a manual entry in

Millennium.

The rework costs reported on the FPI Form 31 must be debited to

General Ledger Account 654200, Cost Of Rework Account, and

credited to General Ledger Account 653300, Planned Cost Variance

Account.