Question

In the context of Standard Costing; Basic Standard is established for

• A. Short period
• B. Current period
• C. Indefinite period
• D. Pre-defined period

Answer 1

The correct option is A Short period

Basic Standards are the unaltered standards which are used over for a longer period of time and do not reflect current conditions. These standards are not useful from the cost of control point of view as they consider only fixed costs. It is only a technique which is used with the intention of controlling cost. A standard cost is an expected cost that a company usually establishes at the beginning of a fiscal year for prices paid and amounts used. The company can then compare the standard costs against its actual results to measure its efficiency.