CA Intermediate · Cost and Management Accounting · Standard Costing
Which of the following best describes a 'basic standard' in standard costing?
A basic standard is a standard fixed for a long period and not revised for minor changes in conditions. It serves as a base for trend comparison, unlike current standards, which are revised often, or ideal standards, which assume perfect efficiency.
- AA standard revised every year to reflect current prices and efficiency
- BA standard fixed for a long period and not changed with minor changes in conditionsCorrect
- CA standard based on ideal conditions with no wastage or idle time
- DA standard based on the average of past actual costs
Explanation
A basic standard is established for use over a long period and is left unrevised despite changes in prices or methods. It works like a base year index for comparing trends. The standard revised regularly is a current standard, and the one assuming no wastage is an ideal standard.
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