Historical Cost
· Historical costs are the actual costs that are ascertained after these are incurred. The historical costing methods are used to
find out the cost incurred for the production of particular products or
completion of a particular job. Limitations: No basis for cost control, no
yardstick for measuring efficiency, delay in availability of information, expensive.
Target Cost
· Target cost
is the estimated cost of a product based upon the customer’s value perception. The purpose of target costing
is to enable a firm to remain
and compete in the
market in the long run. Target cost is the difference between
target price which
the customers are willing to pay and reasonable profit.
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