In the ideal world, every bit of material and labour allocated to a product is used, and no waste is generated. Unfortunately, materials can have defects and precious labour is spent on dealing with it. This means that more input than ideally required is actually used.In developing standard costs for products, management accountants must take defects into account. To do so, they need to have a good grasp of division and multiplication.
If C is the theoretical amount of material or labour and r is its defect rate, the total amount of material/labour actually used (T) is:
T = C/1 - r
