CERTYNEX IFRS ACADEMY

Ferronnerie Valmont sets standard costs for its steel gates, which it uses to measure its finished goods inventories. On what basis must those standards be set?

On normal levels of materials, labour, efficiency and capacity utilisation.

On ideal performance achievable without any stoppage or scrap, to motivate production teams to improve.

On the budgeted costs of the following year, since the gates in stock will be sold during that year.

On the list selling price less the average gross margin observed in the metalwork sector.