Standards for Control:Presence of Expected Variances

Currently attainable standards may be used simultaneously for product costing, master budgets, and motivation. Throughout the illustrations and problems in this book, unless otherwise stated, currently attainable standards are assumed to be in use. If standards are not cunently attainable because they are perfection standards, the amount budgeted for financial (cash) planning purposes has to differ from the standard. Otherwise, projected income and cash disbursements will be forecast incorrectly. In such cases, perfection standards may be used for compiling performance reports, but expected variances are stipulated in the budget for cash pianning. For example, if unusually strict labor standards are used the standard cost per finished.

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Standards for Control:Current Attainability

How demanding should standards be? Should they express perfection, or should they allow for the various factors that prevent perfect performance?
Perfection, ideal, maximum, efficiency, or theoretical standard costs reflect industrial engineers' dreams of a "factory heaven." perfection standard costs are the absolute minimum costs that are possible under the best conceivable operating conditions, using existing specifications and equipment. Ideal standards, like other standards, are used where the management feels that they provide psychologically productive goals.
Currently attainable standard costs are the costs that should be incurred under very efficient operating conditions. They are difficult but possible to achieve. Attainable standards are looser than ideal standards because of allowance for normal spoilage, ordinary machine breakdowns, and lost time. However, attainable standards are usually set tight enough so that the operating people will consider the achievement of standard performance to be a satisfying accomplishment. In other words, variances are more likely to be slightly unfavorable than favorable-but favorable variances may be attained by a little more than expected efficiency. Currently attainable standards are the most widely used because the resulting standard costs can serre marily purposes simultaneously and because they have thl most appealing motivational impact on employeess

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