Setting standards
In this lesson, you'll learn how to set performance standards and use standard costs to build accurate budgets—a core skill for Performance Management and management accounting papers.
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In this lesson
- 0:00 Setting Standards in Budgeting
- 0:31 Four Types of Performance Standards
- 1:45 How Standards Influence Employee Behaviour
- 2:21 Advantages and Disadvantages of Standards
- 3:10 Building a Budget from Standard Costs
- 4:30 Absorption vs Marginal Costing Standards
About this lesson
You'll explore the four main types of standards (ideal, expected, current, and basic), understand how each influences employee motivation and behaviour, and discover the practical advantages and disadvantages of standard costing. The lesson walks you through a worked example of building a budget from standard cost cards for 100 units, then explains the crucial difference between marginal and absorption costing when setting standards—so you know exactly which costs to include when valuing inventory and planning production.
Duration: 6m
Transcript
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