Describe the two major theories used for the detection of out-of-control costs.

Answer: Two main types of standards are established to control costs. External and Internal.

Explanation: External standards are applied for comparing performance with other organisations. The external standards are used for comparing the cost performance with the other firm take the shape of a set of cost ratios. Internal standards, on the other hand, are used for the evaluation of intra firm cost elements like materials, labor, etc.