Question

Explain the difference between a cost standard and an efficiency standard. Give an example of each.

Answer 1

Standard Cost:- An estimated or predetermined cost of performing an operation or producing a good or service, under normal conditions.
Standard costs are used as target costs (or basis for comparison with the actual costs), and are developed from historical data analysis or from time and motion studies. They almost always vary from actual costs, because every situation has its share of unpredictable factors. Also called normal cost.

Efficiency Standard:- efficiency signifies a level of performance that describes using the least amount of input to achieve the highest amount of output. Efficiency refers to the use of all inputs in producing any given output, including personal time and energy.