CA Intermediate · Cost and Management Accounting · Standard Costing
Which of the following best describes a 'current standard' in standard costing?
A current standard is one set on the basis of conditions prevailing now, such as present prices and efficiency, and revised when they change. It differs from a basic standard, which is unchanged for long periods, and from an ideal standard, which assumes perfect efficiency.
- AA standard fixed for a long period and left unchanged regardless of price or efficiency changes
- BA standard that assumes perfect efficiency with no wastage, idle time or machine breakdown
- CA standard based on the conditions prevailing at the time it is set and revised when those conditions change, reflecting current price and efficiency levelsCorrect
- DA standard drawn from the average of actual costs of the past several years
Explanation
A current standard is set for the existing conditions of prices and efficiency and is useful for the short period in which those conditions hold. Option A describes a basic standard, and option B describes an ideal standard. Option D describes a historical or average-cost based figure, not a current standard.
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