Types of standard costs, Cost Accounting

Types of Standard Costs

The standard cost set could be ideal, basic, attainable or current.

i. Basic Standards: These are long term standards that would keep unchanged over the years. This sole needs to show trends over time for those items as material prices, labour rates, efficiency etc.  Therefore they cannot be used to highlight current inefficiency or efficiency; for this causes, basic standards do abnormally form part of the reporting system and will consequently be used as a background for statistical analysis over time.

ii. Ideal Standards: These are standards that can be achieved under the most favourable situations. They are therefore based on the best possible operating conditions. Therefore they do not make allowances for usual production problems as like material spoilage, idle time, stoppages, machine breakdowns, shrinkage. They can be revised periodically to reflect changes in the organizations operating situations. As an example: changes in technology. Though, the ideal standards assume perfect operating conditions, since they would be unattainable in real life that has normal operating problems. As like idle time and machine breakdown, idle time and employee slowdown because of fatigue.

Posted Date: 2/7/2013 5:20:18 AM | Location : United States

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