Historical Costing: In this system, costs are ascertained

only after they are incurred and that is why it is called as historical costing system. For example, costs incurred in the month of April, 2007 may be ascertained and collected in the month of May. Such type of costing system is extremely useful for conducting post mortem examination of costs, i.e. analysis of the costs incurred in the past. Historical costing system may not be useful from cost control point of view but it certainly indicates a tend in the behavior of costs and is useful for estimation of costs in future

Standard Costing :- Standard costs are predetermined costs relating to material, labor and overheads Though they are predetermined, they are worked out on scientific basis by conducting technical analysis. They are computed for all elements of costs such as material, labor and overheads The main objective of fixation of standard cost is to have benchmark against which the actual performance can be compared.

This means that the actual costs are compared with the standards. The difference is called as ‘variance’ If actual costs are more than the standard, the variance is ‘adverse’ while actual costs are less than the standard, The.variance is favourable. The adverse variances are analyzed and reasons for the same are found out. Favorable variance may also be analyzed to find out the reasons behind the same. Standard costing, thus is an important technique for cost control and reduction.