Historical costing is replaced by standard costing
Standard costing is a tool that replaces the bottleneck of historical costing because it provides a more accurate and efficient way of evaluating costs. Let's break down the reasons why standard costing is preferred over historical costing:

Accuracy and consistency
- Standard costing uses predetermined standards for costs, which are based on factors such as past performance and industry benchmarks. This helps in providing a more accurate estimation of costs compared to historical costing, which relies on actual costs from the past.
- By using predetermined standards, standard costing ensures consistency in cost evaluation across different periods and products, making it easier to compare and analyze performance.

Identification of variances
- Standard costing allows for the identification of variances by comparing actual costs with predetermined standards. This helps in pinpointing areas where costs deviate from expectations, enabling management to take corrective actions promptly.
- In contrast, historical costing does not provide a basis for comparing actual costs with predetermined standards, making it difficult to identify variances and address cost discrepancies effectively.

Decision-making support
- Standard costing provides valuable insights for decision-making by analyzing cost variances and performance against predetermined standards. This information helps in evaluating product profitability, setting prices, and making strategic decisions to improve efficiency.
- Historical costing, on the other hand, lacks the analytical capabilities of standard costing, limiting its usefulness in supporting decision-making processes.
In conclusion, standard costing offers a more systematic and effective approach to cost evaluation compared to historical costing, making it a preferred tool for businesses looking to enhance cost control and performance management.