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Question: The staff at a business received incentives based on monthly analysis. Six months after setting the standards for the new product, the operating manager reported back to say that despite unfavourable variances being reported each month, staff seemed less motivated to improve the situation in month six, than they were after the first couple of months.
Based on this information, which standard has been applied to the new product?
Which standard is it and why is it so? How to spot which standard the question is talking about, and why is it so?
Why are you attempting a question for which you do not have an answer? You should be using a Revision Kit from one of the ACCA Approved Publishers – they have answers and explanations
It is an ‘ideal standard’. If employees start to realise that they cannot achieve the standard then they will stop even trying to achieve it.
I do explain standards in my free lectures on variance analysis and on the behavioural aspects of budgeting.