Standard Costing Q&A: What Are The Main Difference between Historical Costing and Standard Costing?

Historical costing :

• Actual cost adjustment is delayed until after the completion of the operation and there is no indication of efficient or inefficient performance.
• The time-lag in reporting costs delays the introduction of corrective action

• The necessary investigation is time-consuming

Compared to:

Standard Costing:

• Standard costing is a system which introduces cost control and cost reduction
• Standard costs are carefully prepared estimates of the cost of operations, carried out under specified working condition.
• Management is motivate and employees are given an incentive. A yardstick is provided to measure performance
• Only variances are investigated by use of the principle of exceptions.
• Corrective action can be taken at an early stage.