Cost control vs cost reduction pdf

Cost control is a preventive function as it ascertains the cost before its occurrence. Abstract this research was based on the consideration of cost reduction and control scheme available or existing in manufacturing companies with special references to port harcourt flour mil ltd. A quick guide to cost control vs cost reduction naseba. Pdf cost control and cost reduction definition advantages and. Effect of cost control and cost reduction techniques in. This article contains mainly some of the techniques of cost control and cost reduction in a very simple and in laymans terminology. The programme for cost reduction should be clearly defined and responsibilities delegated. Phase 1, setting the stage, is concerned with strategy and planning. And by 2020, the impact of new technology, shifting customer expectations and nimble insurtech. Cost planning, cost plan accuracy management, cost control, cost reduction, budget 1. Difference between cost control and cost reduction. This environment is made up of agreed operating methods for which standards have been developed.

The confusion for many arises when the meanings of cost reduction and cost savings become commingled. What is the difference between value engineering and cost. The process of cost control will be completed when the specified target is achieved. One way that companies can regain control over their costs is not only to assess these costs, but also systematically classify and identify product costs. Cost control and cost reduction difference ii cost.

Using a systematic approach to perform cost reduction not only yields cost improvement but provides decisionmakers with the tradeoffs involved in achieving these reductions. Execute it cost reduction as a structured program using leading program management practices. The key difference between cost control and cost reduction is that cost control is the process of maintaining costs at estimated levels while cost reduction aims to lower unit cost of production without compromising on the quality. Cost effectiveness are expenses that are suppose to needed to our project even thoiugh its a breakeven earnings. Cost control aims at achieving the predetermined costs, whereas cost reduction aims at reduction of costs by finding new ways or methods to have continuous economy on costs. Cost control focuses on decreasing the total cost while cost reduction focuses on decreasing per unit cost of a product. So, cost reduction must be a genuine one and should aim at the elimination of wasteful operations, increasing efficiency and effecting genuine cost saving. Our experience shows that administrative costreduction opportunities follow similar patterns virtually everywhere. It is therefore logical that no single tool or method is guaranteed to solve every companys issues.

Cost control is the process of monitoring and regulating the expenditure of funds is. A cost baseline is an approved timephased budget that is used as a starting point to measure actual performance progress. For them, the need to control costs and assisting with a speedy return to production was a big factor in choosing their controls systems. Cost control and cost reduction definition advantages and disadvantages variance analysis ratio analysis cost control techniques. These cost reduction strategies from kepnertregoe provide additional benefits that ripple throughout the business by eliminating waste, accelerating processes, and utilizing resources effectively. Elimination of excess or unnecessary costs in production and operation process by applying different methods and techniques is known as cost reduction. If the cost control emphasis is on past and present, while the cost reduction emphasis is on the present and future. Cost control is the practice of identifying and reducing business expenses to increase profits, and it starts with the budgeting process. The complete programme, or individual sessions or parts of sessions, can also be incorporated in. Each market is different and each companys needs are different.

While cost saving meaning the reduce of unncecessary expenses that are not really needed to our project cost. The adoption of cost control and cost reduction strategies in business organization has become essential in the economy of most business given he level of pritization in organization today, especially the manufacturing sector. Cost control is a technique which provides the necessary information to the management that actual costs are aligned with the budgeted costs or. Conceptually, accounting is the discipline that provides information on which external and internal users of the information may base decision that result in the allocation of economic resource in society. Allocation of responsibility of the various cost reduction levels of management is an important requirement for control of cost reduction of the operation and spheres under his control. Cost control and cost reduction free download as powerpoint presentation. Cost control is a technique which makes available the necessary information to the management that actual costs are aligned with the budgeted costs or not. Value engineering is a systematic method to improve the value of goods or products and services by using an examination of function. Use the course as described in this manual can be used for a specialised course on cost accounting.

Cost reduction strategies can reduce operations costs while increasing productivity, allowing for strategic reallocation of resources. Cost control is concerned with measuring variances from the cost baseline and taking effective corrective action to achieve minimum cost overruns. Unlike cost reduction which is a permanent process. Features of cost reduction cost reduction is not concerned with setting targets and standards. There are several tools and techniques such as just in time system, activity based management, target costing, total quality management etc. An initiative was launched to revamp the cost control system completely, and, in parallel, a cost control tool was developed to monitor costs to operations awaiting. While many of the strategies of cost reduction and cost cutting are the same, every technique of cost cutting does not apply to cost reduction. Cost control focuses on the minimization of wastage than the reduction of cost. The cima, london defines it as the guidance and regulation by executive action of the cost of operating an undertaking, particularly where such action is guided by cost accounting. Cost reduction is commonly implemented in response to an immediate need, and may be a permanent or shortterm measure. Cost reduction is to reduce purchase of items that will not affect our budget cost that could only suffice to our project. Ca final costing cost reduction vs control, pareto analysis in english duration. Reduction meaning elements techniques essentials for success applications differences cost control a process of preventing costs from varying from the amount planned.

Cima, london has defined cost control as the regulation by executive action of the cost of operating an undertaking particularly where action is guided by cost accounting cost control is a process which focuses on controlling the total cost through competitive analysis. Basis of application cost control is routinely applied on a continuous basis. The upcoming difference will update you about the difference between cost control and cost reduction. However, 100% quality maintenance is assured in case of cost reduction. In any organization, the major objective is to maximize profit, but the main constraints facing them are the rise in cost of operation. Besides, cost control is a preventive function whereas cost reduction is a correlative function. Value, as defined, is the ratio of function to cost however, value engineering can also be associated with cost.

Cost reduction focuses on minimization of cost through new production process, improved plant layout, scientific material handling etc. Most people think that controlling costs and reducing costs are one and the same. Cost control and reduction encyclopedia business terms. Cost control and reduction refers to the efforts business managers make to monitor, evaluate, and trim expenditures.

The upcoming discussion will update you about the difference between cost control and cost reduction. The main points of differences between the two are the following. Pdf abstract this research was based on the consideration of cost reduction and control scheme available or existing in manufacturing companies with. Cost control, reduction and estimation in business. Cost control and cost reduction cost accounting audit scribd. Cost control is simply the prevention of waste within the existing environment. Operating room costs control is an important part in the. Sustainable cost reduction is the targeted use of lean methods to remove waste from the biggest cost drivers. There is a difference between cost control vs cost reduction.

Conversely, the process of cost reduction has no visible end as it is a continuous process that targets for eliminating wasteful expenses. Tools and techniques of cost reduction accountingmanagement. In fact, there is a big difference in the way these tactics are used to reduce facilities maintenance expenditures. Difference between cost control and cost reduction business.

These efforts might be part of a formal, companywide program or might be. In an industry facing massive disruption and change. Does cost control and cost reduction scheme affect the quality of the product of the company. Cost reduction is the final result in the cost control process.

Cost control focuses on decreasing the total cost of production while cost reduction focuses on decreasing per unit cost of a product. Cost control and cost reduction are twin objectives of management but their concepts, procedures and approaches are widely different. Cost control does not guarantee quality maintenance. What is the difference between cost control and cost. Cost control and cost reduction ibrahim rihan cost control definition. Can we differentiate between cost reduction cost saving. Difference between cost control and cost reduction mba. Pdf cost control and accountability for effective budget. This paper therefore will examine the exact role of cost control and.

Please complete and send the registration form by email to george. Cost control and cost reduction cost accounting cost. Differences between cost control and cost reduction. Training outline day 1 effectiveness of costs reduction programs analysis of strategy effectiveness in postcrisis period operating costs management cost structure. Difference between cost control and cost reduction with.