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Establishing cost standards is more related to cost accounting. Apart from this, it is also related to the cost of manufacturing company’s direct material, direct labour and manufacturing overhead. We can assign the standard cost or the expected cost to a product rather than assigning the costs for manufacturing overhead, direct labour and direct material. Thus, it is known to be an important tool for various managerial purposes. The management can be aware that the manufacturing costs have differed from the standard costs whenever some variance arises. You can find all the information related to establishing cost standards in Establishing Cost Standards Assignment Help. If the actual cost are found to be greater than the standard costs, then the variance arising is found to be unfavourable. In contrary to it, the resultant variance is found to be unfavourable when the actual costs are lesser than the standard costs.
Different Types of Cost Standards
While studying about establishing cost standards, one can come across different types of cost standards. These cost standards are discussed below
• Ideal Standards or Theoretical Standards- This type of cost standards reflect the business condition that would be under an ideal set of situation and where all business operations would run with an ideal balance at an optimum level. Ideal standards are completely opposite of expected actual standards as the former represents long term goals in terms of performance measurement rather than short term goals. The main purpose of ideal standard is to act like a guiding star and these are not necessary to be achieved. Establishing Cost standards tells us more about the nature and characteristics of ideal standards.
• Normal Standards- These can be inferred as the normal standards that can be achieved sometime in the near future. And this time can be considered as long enough so that it can cover one business cycle. Unlike the ideal standards, here the standards are set a little on a normal side with normal capacity basis that represents a volume which is basically the average of the company’s peak periods and slack periods. Establishing Cost Standards Assignment Help tells us that there is an employment of constant unit costs throughout the cycle. And any changes in the current costs or selling prices do not affect this.
• Basic standards- These are the type of standards which get into effect when there is an unaltered use and that too for an unspecified amount of time. We need to keep in mind that the basic standards need to be adjusted prior to using them for performance evaluation purposes.
• Expected actual standards- It is one of the types of cost standards that are established over a short period of time and are closely related to current situations. Establishing Cost Standards Assignment Help tells us that we can expect current costs from all the current operations that are carried out. Ideal performance cannot be expected from these sorts of standards.
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