Setting standards for

• material requires that management identify the

»- types of material inputs needed to make the product or perform the service.

>■ quality of material inputs needed to make the product or perform the service.

»- quantity of material inputs needed to make the product or perform the service.

>■ prices of the material inputs, given normal purchase quantities.

• labor requires that management identify the

»- types of labor tasks needed to make the product or perform the service.

>- times of labor tasks needed to make the product or perform the service.

»- skill levels of personnel needed to make the product or perform the service.

>• wage rates or salary levels for the level of labor skills needed.

• overhead requires that management identify the

>- various variable and fixed overhead costs in¬ curred in the organization.

>- estimated level of activity to be used in com¬ puting the predetermined overhead rate(s).

>- estimated variable and fixed overhead costs at the estimated level of activity.

predetermined overhead rate(s) used to ap¬ ply overhead to production or service performance.

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