Types of Standard:

There are different types of standard which are discussed below:

(i) Ideal Standard:

This is the standard which can be attained under the most favourable conditions possible. In other words, ideal standards are based on
perfect performance. It is assumed that there is no wastage, no idle time, no inefficiencies or other imperfections in the manufacturing
process. But it is very difficult to attain such standards in practice.

(ii) Expected Standard:

This is the standard which may be anticipated to be attained during a future specified budget period. Expected standards are based on
expected performance. In setting these standards, a reasonable allowance is made for wastage’s and other inevitable lapses. It is more
realistic than ideal standard. This type of standard is best suited from cost control point of view.

(iii) Basic Standard:

This is a standard which is established for use unaltered over a long period of time. Basic standards are set up for some base year and is not
changed as material prices and labour rates change. It is suited for those items of expenses which are fixed in nature. But basic standard is
of no practical importance from cost control point of view.

(iv) Normal-Standard:

This standard is based on average performances of the past. They are attainable under normal conditions. If there is stability in the past
performances, such standards may be useful from cost ascertainment point of view. But, for cost control, it is not so much effective.

Introduction of Standard Costing System in a Factory:

Standard costing is a system of cost accounting which makes use of predetermined standard costs relating to each element of cost—
material, labour and overhead. It is basically a technique of accounting which compares the standard cost of each product or service with
the actual cost to determine the efficiency of the operations.

So, that any remedial measure may be taken quickly. It is the most effective method for controlling performance and cost.

While introducing a standard costing system in a factory, the following preliminary steps are required:

(i) Review of Existing System of Costing:

Before introduction of standard costing system, it is important to review the existing system of costing with special reference to existing
forms and records.

(ii) Study of Technical Aspect:

It is essential to study the technical aspects because standard costing must be based on actual conditions in the factory. Technical aspects
involve methods of production, different processes or stages of production, normal and abnormal losses and gains and input-output
relations etc.

(iii) Organisation Chart:

Lines of authority and responsibility should clearly be defined so that responsibility may be assigned as and when required.

(iv) Allocation and Apportionment of Overhead:

The existing methods and policies in respect of allocation and apportionment should be reviewed in the background of standard costing
principles.

(v) Staff Training:

The staff concerned with the working of standard costing system should be properly trained up.
(vi) Existing Controls:

The existing control techniques like internal control, budgetary control should also be reviewed to avoid overlapping.

(vii) Type of Standard:

Setting up Standard costs for material, labour and overheads is a complicated task. So, an in-depth study should be made to determine the
type of standard to be established.

(viii) Standard Cost Manual:

Standard cost manual should be prepared that should clearly define various terms and procedures to be used. This may provide a good
guide to the staff.