Which statement correctly distinguishes an ideal standard from a practical standard?

• A. Ideal assumes 100% efficiency; practical allows normal waste
• B. Ideal uses actual costs; practical uses standard costs
• C. Ideal is used for services; practical for manufacturing
• D. Ideal is fixed; practical is flexible

Answer: (A)

In standard costing, the key difference is about how strict the efficiency target is. Ideal standards suppose perfect conditions with no waste and 100% efficiency, essentially no downtime or scrap. Practical standards, however, assume conditions that are attainable under normal operating circumstances and include allowances for normal waste and inefficiency. That makes this statement the right one: ideal implies full efficiency, while practical permits normal waste. In practice, using ideal standards often yields large, unfavorable variances because the benchmark is unrealistically perfect, whereas practical standards give a more realistic target and more useful variance analysis. The other descriptions mix up cost bases, applicability, or rigidity and don’t describe the fundamental distinction.