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- 5 Marks
Question
d) Standards are predetermined measurable quantities, set on defined conditions against which actual performance can be compared, usually for an element of work, operation, or activity. Standards are unit concepts that apply to particular products, individual operators, or processes.
Required:
Explain TWO (2) types of standards. (5 marks)
Answer
Types of standards:
- Ideal (Perfect) Standards:
Ideal standards, also known as perfect or theoretical standards, are the standards that can be achieved under the most favorable conditions possible. These standards assume no wastage, spoilage, or inefficiencies of any kind. They represent an optimal level of performance but are often unattainable over sustained periods. Ideal standards are set as ultimate goals for the organization to strive towards, but in practice, they are rarely met. (2.5 marks) - Currently Attainable (Expected Actual) Standards:
Currently attainable standards are those that can be achieved under normal operating conditions. They account for expected wastage, inefficiencies, and other factors that typically occur during production. These standards are challenging but realistic, motivating employees to perform efficiently. Unlike ideal standards, currently attainable standards are more practical and useful for performance evaluation and decision-making. (2.5 marks)
(5 marks)
- Tags: Costing, Performance Measurement, Types of Standards
- Level: Level 2
- Topic: Standard Costing and Variance Analysis
- Series: NOV 2021
- Uploader: Dotse