The management is facing several problems while setting physical standards for direct labour. Out of many problems, some of the problems are briefly explained below.
1. New workers are recruited from time to time in an organization. The new workers do not have previous experience or have less experience. In such a case, an adjustment should be made for the new workers while fixing standard time for the job. This is a difficult task.
2. In the fast changing modern world, there is a lot of technological innovations. Hence, a need arise to install newly advanced technology machine in the production place. The estimation of standard input for standard output requires a long period of time. Thus fixing of accurate standards may be considerably delayed.
3. Some specifications are made for the purchase of some materials. But, the materials are not available with required specifications in the open market. Thus, the standards fixed may not be achievable.
4. The management is not in a position of selecting the type of standard. For example: Standard time for Direct Labour. In such a case, the problem arise whether average performance time is taken as standard time or attainable time is fixed or skilled laborers alone considered for fixing standard time. Like wise, the problem arise relating to allowance of wastage.
The wastage is divided into two i.e.
- controllable wastage and
- uncontrollable wastage.
In the case of uncontrollable wastage, the management cannot do anything. But, in the case of controllable wastage, the problem arise relating to the level of controlling the wastage.
Moreover, the wastage may be classified into two i.e.
- avoidable wastage and
- unavoidable wastage.
In the case of avoidable wastage, the problem arise relating to fixing of level of avoidable wastage. In this way, the effect of standard cost cannot be fixed under these type of situations.