Cost Control and Cost Reduction
ASSIGNMENT ON
COST CONTROL AND COST FREDUCTION
SUBMITTED BY, MOHAMMED NAFAISE E.K ROLL NO: 1600
COST CONTROLL & COST REDUCTION
COST CONTROL
The practice of managing and/or reducing business expenses. Cost controls starts by the businesses identifying what their costs are and evaluate whether those costs are reasonable and affordable .Then if necessary, they can look for ways to cut costs through methods such as cutting back, moving to a less expensive plan or changing service providers. The cost-control process seeks to manage expenses ranging from phone, internet and utility bills to employee payroll and outside professional services.Cost control is operated through setting standards of targets and comparing actual performance therewith, with a view to identify deviations from standards or norms and taking corrective action in order to ensure that future performance conforms to standards or norms.
To exercise cost control, broadly speaking the following steps should be observed:
Determine clearly the objective, that is pre-determine the desired results: The target cost and/ or targets of performance should be laid down in respect of each department or operation and these targets should be related to individuals who, by their action, control the actual and bring them in to line with the targets.
Measure the actual performance: Actual cost of performance should be measured in the same manner in which the targets are set up, that is ;if the targets are set up operation- wise, then the actual costs should also be collected operation-wise and not cost centre or department-wise as this would make comparison difficult.
COST REDUCTION
Cost reduction may be defined as the achievement of Real and Permanent Reduction in the unit cost of goods manufactured or services rendered without impairing their suitability for the use
COST CONTROL AND COST FREDUCTION
SUBMITTED BY, MOHAMMED NAFAISE E.K ROLL NO: 1600
COST CONTROLL & COST REDUCTION
COST CONTROL
The practice of managing and/or reducing business expenses. Cost controls starts by the businesses identifying what their costs are and evaluate whether those costs are reasonable and affordable .Then if necessary, they can look for ways to cut costs through methods such as cutting back, moving to a less expensive plan or changing service providers. The cost-control process seeks to manage expenses ranging from phone, internet and utility bills to employee payroll and outside professional services.Cost control is operated through setting standards of targets and comparing actual performance therewith, with a view to identify deviations from standards or norms and taking corrective action in order to ensure that future performance conforms to standards or norms.
To exercise cost control, broadly speaking the following steps should be observed:
Determine clearly the objective, that is pre-determine the desired results: The target cost and/ or targets of performance should be laid down in respect of each department or operation and these targets should be related to individuals who, by their action, control the actual and bring them in to line with the targets.
Measure the actual performance: Actual cost of performance should be measured in the same manner in which the targets are set up, that is ;if the targets are set up operation- wise, then the actual costs should also be collected operation-wise and not cost centre or department-wise as this would make comparison difficult.
COST REDUCTION
Cost reduction may be defined as the achievement of Real and Permanent Reduction in the unit cost of goods manufactured or services rendered without impairing their suitability for the use
Bibliography: Cost accounting and financial management, part1: cost accounting vol.1 The Institute of Chartered Accountants Of India) Website:www.icai.org