Suggest three situations in which a business organisation might decide to revise standards, as indicated in Figure 15.1, following calculation and analysis of variances. Is revision equally likely for adverse and for favourable variances? Make sure that you know the definitions of adverse and favourable variances. They will appear frequently in the following sections.

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Figure 15.1 Use of standards in the control process Use of relevant specialist disciplines such as industrial engineering and statistics. Measure the standard inputs, in terms of physical amounts and cost per unit. Prepare a standard cost specification sheet, summarising as cost per unit. Compare the standard with the actual result. Calculate and analyse variances. Report regularly to measure 'effectiveness'. Implement control measures. Revision of standards