ACCA Applied Knowledge · Management Accounting · Variance calculations and analysis
A company sets its standards on the assumption of perfect operating conditions, with no machine breakdowns, no idle time and no material waste. Which type of standard is this?
This is an ideal standard. It assumes perfect conditions with no waste, idle time or breakdowns, so it is rarely achieved. Attainable standards allow for normal losses, current standards reflect present conditions, and basic standards are left unchanged for long periods.
- AIdeal standardCorrect
- BAttainable standard
- CCurrent standard
- DBasic standard
Explanation
An ideal standard assumes the best possible efficiency with no waste or downtime. An attainable standard allows for normal losses and is more motivating. A current standard reflects present conditions, and a basic standard stays unchanged over a long period.
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