Cost control is the practice of identifying and reducing business expenses to increase profits , and it starts with the budgeting process. Cost control is an important factor in maintaining and growing profitability.
What is cost control in strategic management?
Strategic cost management is the process of reducing total costs while improving the strategic position of a business . This goal can be accomplished by having a thorough understanding of which costs support a company’s strategic position and which costs either weaken it or have no impact.
What is cost control?
Cost control is the process of collecting actual costs and collating them in a format to allow comparison with project budgets . Cost control is necessary to keep a record of monetary expenditure for purposes such as: minimising cost where possible; revealing areas of cost overspend.
What are the 2 types of cost control?
- Budgets. One of the most basic, common cost-control tools is a budget. ...
- Checks and Balances. A variety of checks and balances also help you keep costs under control. ...
- Software Integration. ...
- Internal and External Audits.
What are the main objectives of cost control and cost reduction?
Cost control aims at reducing the actual to the targets , cost reduction aims at reducing the targets themselves. In other words, the aim of cost reduction is to see whether there is any possibility in bringing about a saving in cost incurred- material, labour, overheads, etc.
What are the steps of cost control?
- Create a baseline. Establish a standard or baseline against which actual costs are to be compared. ...
- Calculate a variance. Calculate the variance between actual results and the standard or baseline noted in the first step. ...
- Investigate variances. ...
- Take action.
What are the types of cost control?
- Planning the budget properly. ...
- Monitoring all expenses using checkpoints. ...
- Using change control systems. ...
- Having time management. ...
- Tracking earned value.
Which tool used for cost control?
Ratio analysis is used as an instrument of cost control in two ways: (i) Ratios can be used to compare the performance of a business firm between two periods. It helps to identify areas which need immediate attention. (ii) Besides, standard ratios are used to compare actual areas.
What is cost control and why is it important?
Cost control is the practice of identifying and reducing business expenses to increase profits , and it starts with the budgeting process. Cost control is an important factor in maintaining and growing profitability.
What are the main uses of strategic cost management?
The basic goal of strategic cost management is to help the company achieve a competitive advantage in a sustainable manner through product differentiation and cost leadership . Strategic cost management focuses more on continuous enhancement to provide consumers with superior quality products.
What are the components of cost control?
- 1 – Planning the Project Budget. ...
- 2 – Keeping a Track of Costs. ...
- 3 – Effective Time Management. ...
- 4 – Project Change Control. ...
- 5 – Use of Earned Value.
What are the essential for success of cost control?
For an effective system of cost control, the firm should have a definite plan of organisation . Authority and responsibility of each executive should be clearly defined. ... It is a method of accounting in which costs are identified with persons responsible for their control rather than with products or functions.
What is difference between cost control and cost reduction?
The key difference between cost control and reduction include: Cost control is a process which focuses on reducing the total cost of production. However, cost reduction aims at reducing the per unit cost of a product . Cost control is a quick process by nature, while cost reduction is a more permanent process.
What is cost reduction with example?
In some cases, improving quality can result in long term cost reduction in areas such as marketing costs. For example, a hotel with high ratings may be fully booked without need to advertise .
What are the disadvantages of cost control?
- Reduces flexibility and process improvement in a company.
- Restriction on innovation.
- Requirement of skillful personnel to set standards.
What is food cost and give its objectives?
The main objects of food cost or material costing are: To ascertain the food cost of particular item on the menu . To ascertain the total expenditure on food over a period of time . To control cost, price, profit margins and provide information for formulating an effective pricing policy.
