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Budgeting & Forecasting › Variance Analysis

What are ideal, attainable, and basic standards?

Intermediate

Answer

Ideal standards assume perfect, waste-free conditions (motivating but usually unachievable, giving adverse variances). Attainable (expected) standards allow for normal inefficiency and are realistic and motivating. Basic standards are unchanged over time for trend analysis but become outdated. The type chosen affects variances and behavior.
Real-world example The firm uses attainable standards so variances reflect realistic, motivating targets.

Common follow-ups: Why can ideal standards demotivate? | What are basic standards used for?

Types of Budgets The Budgeting Process Variance Analysis
All 38 Variance Analysis questions