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PLAGIARISM SCAN REPORT

Date 2021‐08‐28

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When we talk about the techniques of costing, budgetary control is a significant technique. A budget is a quantitative
statement prepared prior to the defined period in order to help achieve certain goals of the firm. This budget can be in the
form of monetary statement or quantities.

For instance, a production budget will deal in quantities of goods to be produced. On the other side, a marketing budget
will be a monetary statement. Another significant characteristic of a budget is that it is prepared ahead of time. So the
budget can be for the next quarter or the next year or any such time period.

A budget will lay down the objectives of this period, and the firm’s techniques to achieve them. Budgetary control is the
preparation of budgets and analysis of the actual performance of the firm in accordance to the budgeted numbers. If there
is a lot of variation from the budget the firm can take necessary steps. This is how budgetary control works.

INVENTORY CONTROL:

Inventory control is a process of checking a shop’s stock and to maintain the inventory at desired levels, keeping in mind
the best economic interest of an organization. In simple words, inventory control is a process of ensuring that a business
keeps the sufficient quantity of stock to meet the forecasted demand with minimum holding cost.

Managing adequate stock is soul for managing inventory successfully. Overstocking will result in additional cost for
managing excess stock and cash flow blockage. On the other hand, understocking results in loss of sale due to non‐
availability of stock at the correct time.

As a result, a business has to implement inventory control so that the right product at the right place and the right time is
available. Inventory control helps the firm in knowing the shortfall and quantities to be ordered considering the net stock
available. Thus, it makes sure that enough stocks are maintained to meet customer needs, at any point in the given time.

Maruti Suzuki of India is one of the country’s largest car‐maker and has been taking a variety of different steps to enhance
localisation, increase in the productivity and make sure to reduce the OVERALL COSTS in order to improve the current fiscal
year’s margin. It is just in the year 2018‐2019 that the company reported an EBITDA margin of 14% which is down by 1.9%
from 15.9% which was 2017‐18 EBITDA margin.

The company budgets the expenses and makes sure that the expenses are as per the standard that is set for the company
and on top of that find ways to reduce the costs incurred in the standard and match the actual cost with the standard. This
in particular is feature of Maruti Suzuki Ltd. which is the reason they are leader in the automobile industry, they get
adequate profits by reducing costs at a given amount of revenue.
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The CFO of the company recently said that they are working very hard on cost cutting and they are putting in a lot of
efforts on the cost side. They have reiterated that as a company they are committed to work towards it and ensure
improving the margins of the company from this juncture.

The CFO has mentioned that they will work on the internal factors of the company and reduce costs wherever they have
control without worrying about the external factors such as foreign exchange rates.

External factors exists but it would be important for company and its management to focus on the things that are in
control and work harder in terms of cost reduction and enhancing productivity.

Increasing localisation is one of the most important part of this initiative

Localisation is the biggest driver in reducing costs of the company. Wherever the foreign exchange rates have hit Maruti
Suzuki, they are trying to make sure that the localize in that aspect, therefore they are now looking at large targets for
localization. They have been successful in doing so back in 2013 during the slight recessionary phase. They localized some
of their aspects and this reduced their costs. They are continuing with the same strategy now.

Overheads are under severe scrutiny

The overheads of the company are under scrutiny so that the wasteful overhead expenses can be done away with it.
Usually for a company going away with overheads expenses ﴾which are mostly fixed expenses﴿ are very hard to go away
with in short run, this is why this cost control, reduction and re‐structuring is a wider plan by the company to set realistic
targets for overhead expenses and control them. The company is looking forward at vendors in terms of more productivity
gains, what essentially they are doing is that they are looking for supply vendors who are less costly and more productive
in the sense that, more production is done with the low supply costs.

The company said that they are doing a variety of things and they have been successful in their strategy and hope that the
situation improves from here on.
The company had noted a decline in net profit to Rs 1795.6 crore for the fourth quarter of 2018‐19 which is a 4.6% decline
in net profit. For the entire year MSI posted a net profit of Rs 7500.6 crore which was down by 2.9% from the previous
financial year.

Though for the year 2019‐2020 the company faced a more decline in profits but it was on account of general market
demand reduction and subsequent effect of covid 19 in January and February. But when analysed the company made
severe reductions in cost in many areas of the company.

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PLAGIARISM SCAN REPORT

Date 2021‐08‐28

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· Cost control is the regulation and guidance through an executive action that is exercised in respect of all the
expenses incurred in a task. Cost control includes all measures and procedures by which the cost of a task is kept under
check and its objective is to make sure that costs do not exceed a certain level.

· Cost Control is the process of collecting actual costs and collating them in a format to allow comparison with project
budgets. Cost control is important to keep a record of financial expenditure for many purposes. It is simple method of
identifying and reducing firm’s expenses to increase profits.

· For this, the owner of the business compares the company’s actual monetary results with the budgeted expectations
and if actual costs are higher than calculated, management must take action.

· Cost control and cost management are two terms that are used interchangeably.

Cost management is concerned with the whole process of planning and controlling. Planning, estimating, budgeting,
financing, funding, managing, and controlling and the main activities of cost management. This ensures that the project
can be completed within the decided budget.

· Cost control, on the other hand, is concerned with measuring variances from the cost baseline and taking effective
corrective action to achieve minimum cost overruns. It helps the management in regulating costs of a unit. The
management uses the cost control techniques to produce a product at the lowest possible cost by identifying and
eliminating any sort of unnecessary costs and yield more profits. This prevents cost waste from taking place.

TOOLS OF COST CONTROL

Cost Estimate: This tool is used in the primary or initiation phase. In this phase, the users have to evaluate the financial
viability of a particular project.

Budget: This tool is used in the planning/primary phase. In this phase, the users plan out the work by considering the
estimated costs of overall project and converting it into a budget.

Cost Monitoring: This is used in the implementation/execution phase. In this phase, the user monitors their costs to assure
that there is no sort of overspending or unnecessary spending so that they can keep the expenditures in line with the
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budgets.

Financial Evaluation: This is used in the Last/closing phase. In this phase, users evaluate if a particular project has met the
pre‐determined financial targets or has fail to do so.

IMPORTANCE OF COST CONTROL

This system is highly helpful for companies in avoiding the unnecessary costs involved in a particular project. With this,
companies can eliminate wastage of costs in an effective manner. It helps the users to evaluate the financial viability of a
specific project. It helps the users in finalizing the cost estimate and based on it to design a budget for a particular project.
Users can use a cost‐control mechanism to regulate and monitor the costs incurred in a project from time to time.

DIFFERENCE BETWEEN COST CONTROL AND COST REDUCTION

Cost Control can be defined as a technique that is used to control the costs, whereas cost reduction is a process that is
used to reduce or minimize the overall cost of production.

Cost reduction is a permanent process, whereas cost control is temporary in nature.

BASIC MEASURES FOR EXERCISING EFFECTIVE COST CONTROL:

The cost control process involves setting of cost centres followed by pre‐determination of cost functions. The following are
the basic measures for exercising effective cost control:
· Quantity and price standards should be estimated for or set for each physical unit. The factors influencing variances
should never be ignored ﴾poor organisation and poor materials, inadequate facilities﴿.

· All concerned should be associated in determining standard costs to make the standards realistic

· The data collected should be kept to a minimum because proper collection and processing of cost control data are
significant.

· The different prices, variances, mix, usage and efficiency should be considered, whether they are relating to materials,
overheads or labour.

· No amount of detailed analysis of the cost of variances can undo what has already been done; however, control
measures should ensure that such mistakes are not repeated. The only way to prevent excess costs in practice is for the
manager to take action before the event.

· The essentials of effective cost control not only include flexible attitudes regarding the standards set but also realistic
targets ﴾based on work study data﴿.
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COST CONTROL TECHNIQUES

STANDARD COSTING:

Standard costing is mainly a cost control technique. It is used either with the specific order type, or with the process or
orientation type of cost accounting system. Its main purposes are to provide bases for control using variance accounting. It
may be used for valuation of stock and WIP and in few cases, for fixing selling prices.
Under standard costing system, a variance report, that reconciles the budget profit with actual profit, is placed before the
management with explanations for variances. A mechanism to provide feedback to managers on variances from target
results is what a variance reporting is.

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PLAGIARISM SCAN REPORT

Date 2021‐08‐28

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Strategically Managing costs Cost controlling measures at DIL usually span across strategic art movement coming up with,
use of mark hedging mechanisms and e‐sourcing initiatives. the subsequent efforts of the corporate significantly stand go
in this context: Addressing Input‐Price Inflation Apart from the staple FMCG things like dentifrice and shampoos, DIL
includes a major interest within the Indian beverage market, wherever it operates its vary of fruit and vegetable based
mostly beverages underneath the brand ‘Real’. Here forward cover for major raw materials running upto 3 months has
helped DIL combat food inflation and hold its costs steady as compared to its rivals. Holding its worth steady in {an
exceedingly in a very} disruptive market helped maintain the market‐share for DIL’s brands; complemented effectively with
an integrated approach to boost sales volume. Rising input costs are for the most part slaked through such volume‐driven
growth. Here it should even be mentioned that DIL has reworked provider networks, consolidated them and hedged risks
through future commercialism. Inside the company, the short and medium‐term coming up with programmes that
guarantee regular forecasts from its team of strategic planners at intervals every division and department are particularly
useful. 3‐month forecasts on the business situation square measure provided by these planners to the complete groups for
taking effective measures to combat inflation. Moreover DIL instituted “The Dabur Inflation Basket” for its most relevant
commodities, that a lot of} is connected to the Wholesale index of the country and facilitate the corporate to reach actual
inflation figures that facilitate it to set up ahead in an exceedingly more targeted manner. Another important effort during
this context has been consciously making product wherever blends using Indian fruits and pulps turn out a similar quality
of output that may be created using exotic foreign varieties. This except curtailing the reliance on imports helps to
drastically slash down costs. Cutting flab Based on deep consumer insights, DIL has known product and packaging options
that the buyer doesn't want and cuts them down. Similar observations have additionally been created in respect of the
usage of energy and water likewise as labour cost. This successively has been effective in reducing the operational value
well. the company has wanted to boost productivity in the slightest degree its producing locations by deploying numerous
cost reduction and energy saving initiatives that has additionally resulted in an exceedingly sharp drop in its producing
costs. In its producing unit at Baddi, DIL initiated Total Productivity Management ﴾TPM﴿ principles through associate degree
external advisor, moving towards inflated automation and multi‐operator construct. ﴾DIL Annual Report – 2008‐2009﴿ A
new manufacturing technology for extraction of medicative actives from herbs was extended at numerous locations
throughout 2008‐09, generating potency in energy costs and providing cleaner and safer producing procedure at the units
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CONCLUSION

· Thus, we can conclude that just coming up with a project budget is not adequate while your planning sessions. You
have to keep an eye on whether the costs remain close to the figures of your budget. Cost control is beneficial for firms
because it helps them in controlling and regulating the costs that are involved in a certain project. It also helps in
enhancing the creditworthiness of a firm and also contributes to the wellness, prosperity and economic stability of the
industry.

· The primary and main objective of any organisation is to maximize profit which will sustain growth and existence of
the business. This objective can be achieved by effective cost control strategies. Cost control increases both the employee’s
production and organisation’s profitability.

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https://icmai.in/Knowledge‐Bank/upload/case‐study/2012/Managing‐Costs.pdf