Cost control and cost Reduction

Meaning of Cost Control Meaning of Cost Reduction

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Meaning of Cost Control

Cost Control is simply the achievement of predetermined costs. The Chartered institute of management account, London defines Cost control as the regulation by executive of cost operating and undertaking particular way such action is guided by cost accounting.

It Involves:
The determination of standard (planned) Cost. The recording of actual cost. The comparison between predetermined (standard Cost and

Actual Cost).
The finding out of variances. 6/23/12

Meaning of Cost reduction

Cost reduction may be defined as the permanent reduction in the unit cost of goods manufactured or services rendered without impairing their quality and achievement of real Click to edit Master subtitle in the unit cost of and permanent reductionstyle goods manufactured or service rendered without imparing their suitability for the use intended or itability for use. The chartered institute of ManagementLondon , defined as the diminution in the the quality of the product.
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Distinction between Cost control and Cost reduction

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2)

3)

Object: The aim of cost control is to achieve the predetermined costs where as cost reduction aims at real or permanent reduction of costs by adopting new methods, technology etc. Method: Cost control is concerned with determination of standard costs, ascertaining actual costs, Click to edit Master standard with comparing with the subtitle style the actual costs, analyzing the variances and taking corrective actions for the future. On the other hand, cost reduction is not concerned with maintenance of performance according to predetermined standards. Nature: Cost control is static in nature in the sense that it is a routine exercise carried out to achieve the fixed predetermined standards, whereas cost reduction is a continuous exercise to reduce further on 6/23/12

Advantages of Cost Reduction and Cost 1) Proper utilization of resources. control

2) Minimizing costs. 3) Reasonable prices for customers. 4) Increased profits. 5) Better market position. 6) Increased efficiency. 7) Improved productivity. 8) Higher rate of ROI. 9) Increased capacity to cope competition.
6/23/12 10)Improved employer-employee relationship.

Areas of Cost Reduction

The scope of cost reduction is so wide that it is not possible to limit the areas in which cost reduction may be applied. It is attainable in almost all areas of business activities. In fact, wherever costs are incurred, there is a scope of cost reduction.
a) Product design b) Production planning and control. c) Organization d) Plant layout and equipment. e) Purchasing and material control. f) 6/23/12 Marketing

for cost reduction are:

1) Standard costing. 2) Budgetary control.

Tools and techniques of cost reduction and techniques commonly used The various tools

3) Economic order quantity. 4) Production planning and control. 5) Standardization and simplification 6) Rationalization 7) Automation 8) Design Analysis 9)6/23/12 Quality control

Meaning of Cost Audit

According to the Institute of cost and works accountants of London, Cost audit is the verification of the correctness of cost accounts and adherence to the cost accounting plans. Cost audit is the systematic examination and verification of the correctness of cost accounts, costing techniques and systems so as to ensure the adherence of the same to the cost accounting plans and objectives.

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Advantages of Cost Audit

1) Advantages to the Management. 2) Advantages to shareholders. 3) Advantages to consumers 4) Advantages to workers 5) Advantages to government and public

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Types of Cost Audit

Statutory Cost Audit Cost audit on behalf of the management Cost audit on behalf of the Government Cost audit on behalf of the customer Cost audit on behalf of Trade Associations Cost audit on behalf of Tribunals.

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