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CMA Intermediate · Management Accounting · Standard Costing and Variance Analysis (Management Accounting)

Which standard assumes that no allowance is made for machine breakdowns, idle time or wastage, and is therefore generally regarded as demotivating if used for performance evaluation?

The ideal standard is the one assuming perfect conditions with no breakdowns, idle time or wastage. Because it is almost never attainable, it produces constant adverse variances and can demotivate staff, unlike current or normal standards, which allow for expected inefficiencies.

  1. AIdeal standardCorrect
  2. BNormal standard
  3. CBasic standard
  4. DCurrent standard

Explanation

An ideal standard assumes the best possible conditions with no inefficiency, breakdowns or wastage. It is rarely attainable, so adverse variances persist and staff may be demotivated. Normal and current standards allow for expected inefficiencies, while a basic standard remains unchanged over years as a base for comparison.

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