Pure historical costs – only actual costs are used for all types of costs. But even if historical costs are used, a number of allocations are usually necessary (e.g. overheads) to obtain unit cost. (3)
Normal historical costs – historical (actual) costs are used for direct material and labor, but overheads are allocated based on predetermined overhead absorption rate. Because the rate is estimated in advance, under or over absorbed overheads arise. (3)
Estimated cost – cost estimated prior to the production without any connection to actual costs (this connection to actual costs makes the basic difference between standard and estimated costs); estimated cost is less precise than standard cost.