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Cost Control

The document discusses cost control and cost reduction. It defines cost control as setting targets and standards to prevent costs from exceeding budgets. Cost reduction aims to lower unit costs by reducing waste, expenses, and increasing production. Effective cost control requires continuous examination and analysis of costs, as well as challenging standards. Cutting costs too deeply can hurt a business, so the most obvious costs should be reduced first before deeper cuts. Cost control affects all expense categories and keeps cash flow at necessary levels.

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VipulSambhar
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132 views18 pages

Cost Control

The document discusses cost control and cost reduction. It defines cost control as setting targets and standards to prevent costs from exceeding budgets. Cost reduction aims to lower unit costs by reducing waste, expenses, and increasing production. Effective cost control requires continuous examination and analysis of costs, as well as challenging standards. Cutting costs too deeply can hurt a business, so the most obvious costs should be reduced first before deeper cuts. Cost control affects all expense categories and keeps cash flow at necessary levels.

Uploaded by

VipulSambhar
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Group members: Abhijit Roy Shraddha Salvi Vipul Sambhar Suraj Shelar Dipanshoo Shende Ritesh Shirsat

90 92 93 97 98 102

Cost

control is operated through setting standards of targets & comparing actual performance. It is done to see the deviation from standards & to take corrective action in order to comply with the standards. Its ensure that in future performance would be according to the standards.

Its

the continuous process of critical cost examination, analysis & challenge of standards. Its the continuous process which includes critical cost examination, analysis & challenge of standards. Critical examination of product, process, procedure, methods, personnel & reviewed.

Cost Reduction

Cost Control

Aims at achieving reduction in unit cost of goods. It believes that waste reduction, expense reduction & increased production cost could be reduced. Its a corrective function.

It aims at achieving the predetermined cost targets & ends when the targets are achieved. It sets the targets, ascertain the actual performance, & compare it with targets, take measures of deviations. Its a preventive function.

When

expenses are controlled, they are restrained from growing larger than they should grow. It indicates that expenses have not been allowed to grow past a reasonable level than what the expenses are intended to accomplish. It indicates that expenses have not been allowed to grow past a reasonable level than what the expenses are intended to accomplish.

To

control costs means managers are staying on top of operations and attempting to create the maximum profit margin. Cost control affects every expense category in a company. Cost control is a systematic review of the resources a company uses to achieve its mission.

Ability

of a company to keep cash flow at necessary levels for operations. With cost management, excessive amounts of cash are not tied up in too much inventory, too high supply stocks, or over staffed departments. This keeps cash available for other purposes including navigating economic waves, expansions needs, or equipment maintenance and repairs.

Sometimes

managers cut crucial costs too deeply and end up actually hurting the business. Instead, the most obvious costs can be considered for cuts first. Gas & Electrical bills Telephone charges Postage Office Supplies Technology Leases Copy costs

If

cutting the most obvious expenses proves to be ineffective, then next plan would be implemented. Cutting costs in business should be selective like,
Vendor Contracts & Service Renewals Insurance Requirements Insurance Costs Fixed Asset Amounts Inventory Levels

These

types of expense categories can be departmental specific and have a greater impact on the total profitability of the company. The best cost cutting plan for any business is not letting expenses run rampant even during busy times.

Cost

reduction is a reaction to a problem. Managers who must implement a cost reduction plan are solving a problem that might possibly have been avoided. Using the right strategies will result in a more efficient company spending.

Many

companies seem to believe that sending out a memo to all employees ordering budget cuts is all it takes to reduce expenses. Such an approach usually causes a lot of internal harm in terms of lowered employee morale. Employees are left feeling that their efforts are unappreciated and their work too costly for the product produced.

Thorough

understanding of company expenses, a vision of the future, and the desire to continue to satisfy customers. The process of reducing costs is not about making journal entries in the accounting system. It should be the implementation of a thoughtful plan of action with employees that are involved in the process.

Employee

Involvement with Idea Generation

Meetings Revise current structure of production or service delivery Create new processes Blend current and new techniques in-house Form cooperative arrangements with other industry members

cost reduction program is expected to achieve results that flow to the bottom line of the financial statement without causing damage to the organization itself. A good cost reduction program is as much about damage control as it is about cutting costs.

cost reduction program is really about improving profitability. By reducing expenses, profits are increased without even addressing sales program enhancements. If the cost reduction plan is matched with a sales increase program, it doubles the results. A structured plan will put a company on track to achieve maximum profitability.

When

looking at a cost reduction program, don't assume that the most obvious cuts are the right cuts. Innovative management techniques can offer new ways to approach old problems.

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