AMA Q22 - Chapter 6

Question 1

Standard cost

Answer 1

estimated unit cost (product or service)

Question 2

How is a standard cost calculated?

Answer 2

1. materials usage and efficiency
2. prices of materials, labour and overheads
3. budgeted overhead costs and budgeted level of activity

Question 3

Ideal Standard

Answer 3

setting standards on perfect working conditions, no wastage

Question 4

Target standard

Answer 4

standards as set using room for improvement but also acknowledging wastage. It still requires efficient working (just not perfect)

Question 5

Normal Standard

Answer 5

Standard set on current productivity and wastage levels. No motivation to change

Question 6

Basic Standard

Answer 6

based on historical data and is unchanged. Can often be out of date if a key factors have changed such as the organisation structure