CA Intermediate · Cost and Management Accounting · Standard Costing
Which statement about a standard that is set at the level of 'ideal standard' is correct?
An ideal standard assumes perfect conditions with no wastage, idle time or inefficiency, so it is rarely achievable in practice. Standards allowing for normal losses and delays are attainable standards, and those based on past averages are historical standards.
- AIt assumes no wastage, no idle time and maximum efficiency, so it is rarely achievableCorrect
- BIt is based on the average of past actual performance
- CIt allows for normal losses and normal idle time
- DIt is the standard expected to be attained under current conditions
Explanation
An ideal standard is set assuming the best possible conditions, with no wastage, breakdowns or idle time. Hence it is seldom attained. Standards allowing normal losses are attainable (normal) standards.
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