Chapter 22 Q: 2, 3, 5, 6, 7, 8, 9, 14, 15, 17, 19, 21, 22 | P: 2A, 3A, 5A
They are similar in that they are both used for costing purposes. However, a budget is
usually a maximum amount to be spent, while a standard is an estimate on what things will cost, based on
With standards, you work things with as you normally would, by using the standard to
estimate the cost of something. A budget however is used to estimate the overall cost of something.
Promote greater economy, are useful in setting selling prices, contribute to management control,
permit management by exception, simplify the costing of inventories and reduce clerical costs
An ideal standard is the optimal levels of performance, under perfect operating conditions.
Normal standards are the actual, efficient levels of performance that you can actually achieve in normal,
expected operating conditions.