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Chapter 15

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.

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