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Ideal vs. Normal Standards/Price & Quantity Standards

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Sally,
The setting of standards is critical to the effective use of standards in evaluating performance.
Explain the following in a memo.

(a) The comparative advantages and disadvantages of ideal versus normal standards.

(b) The factors that should be included in setting the price and quantity standards for direct materials, direct labor, and manufacturing overhead. (Kimmel 1183)

Reference,
Kimmel, Paul D. Accounting: Tools for Business Decision Making, 4th Edition. John Wiley & Sons, 07/2011. VitalBook file.

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Solution Summary

This solution discusses the comparative advantages and disadvantages of ideal versus normal standards, and the
factors that should be included in setting the price and quantity standards for direct materials, direct labor, and manufacturing overhead. Includes APA formatted reference.

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Hope this helps- let me know if you have any questions.

Kimmel, Weygandt and Kieso (2011) explain ideal standards represent "optimum levels of performance under perfect operating conditions" (p. 1140). In contrast, normal standards are "efficient levels of performance that are attainable under expected operating conditions" (p. 1140). If a company aims for ideal standards it sets a high goal for workers that encourage improvement. However, a disadvantage may be frustration and workers may become demotivated since conditions are rarely perfect and it is a goal that is difficult to ...

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Sally Baldwin, Ed.D
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  • Ed.D, Boise State University
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