Explain the Types of standards
The following is the brief description of various types of standards:
1) Basic standards: these are the standards which are assumed to remain unchanged for a long time. They are also called bogey standard fixed standards or static standards.
2) Strict or tight or ideal standards: These standards represent absolute minimum costs. They assume the prevalence of the best conceivable operating condition under which such standards can be achieved. Ideal standards call for a high degree of efficiency and performance. However, it may be noted that a very high standard may motivate or de motivate workers due to involvement of human behavior aspect. These standards are also called perfect maximum efficiency or theoretical standards.
3) Normal standards: these are average standards and are useful in long term planning and decision making. They cover one trade cycle. In the development of normal standards it is assumed that, the long run generally comprising a trade cycle consisting of boom and slack periods, such standards can be achieved.
4) Attainable standards: these are standards which can be attained or achieved with reasonable efforts. They are based on practical consideration and are also called expected or practical standards. They are more realistic and useful for control purposes. It is assumed that attainable standards would be achieved during the future specified period.
5) Loose or lax standards: when standards are deliberately set blow efficiency level to show favorable variances they are called loose or lax standards. They are the outcome of a tendency to indulge in self praise assuming that favorable variances would keep the motivation and morale of workers high.
6) Revised standards: to keep pace with changing condition standards have to be revised from time to time. When standards are changed to correspond with current condition they are called revised standards. These standards assume that thing are not static and, with the change of the situation standards should also be revised.
7) Current standards: standards set for the current period are called current standards. They reflect what the performance would require a periodical revision of standards.
8) Historical standards: these are average standards achieved in the past. From the control point of view, these standards are not of much use and may include in efficiencies of the past. However at the initial stage of setting up a standard costing system such standards may be used due to their easy determination and adaptability.