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Dear Tr.Moffat,
When considering setting standards for costing, which of the following would NOT be appropriate?
A. The normal level of activity should always be used for absorbing overheads
B. Average prices for materials should be used, encompassing any discounts that are regularly available.
C. The labor rate used will be the rate at which the labor is paid
D. Average material usage should be established based on generally-accepted working practices.The answer is Number C.
My question is what is the reason for NOT be appropriate for setting standards for costing?Thanks.
May
The rate used should be the rate that they should be paying – not the rate that they actually pay.
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