Cost Control and Cost Reduction

Topics:
 Meaning of Cost Control  Elements of Cost Control Scheme  Essentials for success of Cost Control  Advantages of Cost Control

Definition:
-The Chartered Institute of Management Accountants, London defines Cost Control as: “The regulation by executive action of the cost of operating an undertaking particularly where such action is guided by cost accounting.”

Cost Control aims at reducing inefficiencies and wastages and setting up predetermined costs and in achieving them.

Elements of Cost Control Scheme:
Set down a standard/ target. Select a yardstick. Ascertain the actual performance. Compare the actual performance. Analyze the variances by causes. Take corrective action. Periodically review the standards.

Essentials for success of Cost Control:
Firm should have definite plan of organisation. Costs should be collected for each of responsibility. Report should draw management’s attention. Good performance should be rewarded. Proper setting of standards.

Advantages of Cost Control:
Achieving the expected return of capital Increase in productivity of the available resources Job opportunity Economic use of limited resources of production

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