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CMA Intermediate · Corporate Accounting and Auditing · Inventories (Ind AS 2)

Under Ind AS 2, when may standard cost be used to measure inventory cost?

Standard cost may be used for convenience only if the results approximate actual cost. Standards must reflect normal levels of materials, labour, efficiency and capacity utilisation, and be regularly reviewed and revised in light of current conditions.

  1. AWhenever it is lower than actual cost
  2. BOnly for finished goods and never for work in progress
  3. CFor convenience, if the results approximate costCorrect
  4. DOnly if standards are never revised during the year

Explanation

Standard cost is a technique that may be used for convenience if the results approximate cost. Standards reflect normal levels of materials, labour, efficiency and capacity utilisation. They must be regularly reviewed and revised if necessary, so the last option is wrong.

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