Page 111 - BA2 Integrated Workbook - Student 2017

Standard costing and variance analysis

1.3 Types of standard

There are four main types of standards:

 Ideal standard

 no allowance for inefficiencies such as losses or machine downtime.

 almost always result in adverse variances

 can be demotivating for managers

 Attainable standard

 assume efficient levels of operation, but which include allowances for
factors such as losses, waste and machine downtime.

 adverse variances will reveal whether inefficiencies have exceeded this
unavoidable amount.

 more acceptable to managers

 Current standard

 based on current performance levels

 do not encourage any attempt to improve on current levels of efficiency.

 Basic standard

 set for the long term and remain unchanged over a period of years.

 often retained as a minimum standard and can be used for long term
comparisons of performance.

103