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* Cost Control - a method whereby costs are managed and monitored to ensure they do not grow beyond the projected amount. * Cost Reduction - a method whereby costs are reduced from the projected amount. Cost Control When overseeing the construction of a large building, the cost for various components of the building will vary. At the initial phase of construction (during the concept & budgeting phases), it may have been projected that the glass for all the windows would cost a total of $35,000. A large project like this can take time, though, so by the time the buidling is far enough along in the construction phase to need the glass, the cost for the glass may have risen to $42,000 (rising fuel prices, natural disasters, shortage of raw materials, etc). Therefore the cost will increase for this one component of the building, which impacts the overall cost of the building itself. But, to compensate, you can control the overall cost of the building by buying less expensive materials for the remainder of the project, such as carpeting, door hardware, and even Plumbing fixtures and outdoor landscaping. This adjustment could be considered Cost Control, in that you are controlling the overall costs of the project and making compensations and adjustmentst to ensure the final price tag for the building does not grow beyond the projected amount. Cost Reduction When producing a particular product, the manufacturing of that product (say, a tennis shoe) is comprised of many individual components. Over time, the market can not pay you more for the product you manufacture (consumer spending is down), so you can apply some methods to reduce the costs you pay to make that product. The price to the consumer does not change, but your expense-to-incomeratio gap is increased, which leaves you with more profit. As an example, one of the materials you use to make the tennis shoes is shipped from a supplier three states away. You learn that you can buy more of this material from the supplier and have it shipped by rail rather than the smaller shipments that were trucked in each week. Since the cost for fuel has risen, the trucking company is charging you more for each shipment. To reduce the overall cost of obtaining this material, you use a bulk-buy-ship method. The supplier sells this material to you at a cheaper rate since you are buying so much more at one time, and the cost of shipping it by rail is cheaper because that larger load is better handled by the rail company than by individual trucks. This cost reduction will widen the gap between how much it costs you to make the tennis shoe, and how much you are paid by the consumer.
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What is the theory of Cost Control and Reduction in Managerial economics?
Cost control implies controlling the costs at the given level. The accent is an adhering to the pre-determined standard and the emphasis is on ensuring that the cost does not exceed the said standard budget. Acceptance of the given standard as "ideal" builds up a static approach and the attention of the management is confined to the analysis of variances alone in line with the principle of "management by exception." Cost reduction is however, a dynamic exercise, an all-out effort to reduce cost from whatever level they are. Nothing is assumed as "standard", nor anything. Is accepted as "ideal". Every element of cost is scrutinized, every operation is screened and every procedure is analyzed to identify the ways and means of reducing costs. Cost reduction and cost control differs in approach as well, For effective cost control, cost is considered for each 'cost centre' (unit produced) separately (for which the standard/budget is predetermined in order to obviate to the possibilities of compensating effects of favorable variances against unfavorable ones. For successful cost reduction, on the other hand, the reduction in cost is considered in aggregate for the organization as a whole, the appear at the point of reduction, it may amount to a substantial amount when aggregated at corporate level. To apply this analogy to the banking industry, if each of the branches avoids "tearing off" of at least two blank vouchers per day. (and tearing of vouchers is by no means, uncommon in banks), for 300 working days, on an average the branch will save 600 vouchers i.e., 6 pads Even after making allowance for statistical fallacy, the above example, provides as essential clue to the fact that the triviality of reduction in cost at the point of reduction is no excuse for achieving cost reduction. This is the approach that must be built up at all levels to inculcate cost consciousness while embarking on cost reduction plan. Further, cost reduction is not a 'one-time' exercise. It is an attitude of mind, a habit, a philosophy. The approach for reduced cost must originate from the conviction of the need for it. Genuine cost reduction is essentially a function of cost consciousness on the part of persons involved and a cost reduction plan imposed upon without proper understanding among the employee will die a natural death without yielding any permanent contribution. The ideal way of creating cost consciousness is to perculte the message of cost reduction to all the levels and defining the highlighting the role and responsibility of every employee in every part of the organization. Every employee must be appraised of his importance in the entire organization and the contribution he can make in his individual capacity by virtue of the position held by him. The entire work force must be engaged with total commitment and unbiased involvement to make the cost reduction programme a way of life. The concern for involvement of employees can be shown by making available ample opportunities for expressing their views and establishing efficient machinery to receive, appraise, practice and reward suggestion received from employees. The spirit of co-operation and involvement can be further spread through house journals/magazines periodical circulars, seminars meetings at various levels, publicity plascards and advertisements etc. Involvement the plan itself since the former will create cost consciousness which will ultimately determine the success of the programme.
Differentiate between normal profit and economic profit?
Economic profit is when revenue exceeds total cost of inputs. Normal profit, on the other hand, is net profit less costs.
What are the advantages of variety reduction in a company?
The Advantages of variety reduction are well known and can mostly beassessed in terms of hard cash, taking due account of the additional cost reduction effects on associated parts and operations
Reduction in cost of a good brought about by increasing size of a production facility?
economies of scale
What happen to the marginal-cost curve when there is a reduction in business property taxes?
There will not be any change.
What are the Differences between cost control and cost reduction?
Cost Control - a method whereby costs are managed and monitored to ensure they do not grow beyond the projected amount.Cost Reduction - a method whereby costs are reduced from the projected amount
What are the Objectives of Cost Control and Reduction?
Cost control and reduction is the way that business managers monitor, analyze and cut expenses. The objective is to lessen expenditures.
Differences between cost control and cost reduction?
Cost Control - Taking Steps to ensure that the cost expenditure in the project is in line with what was planned during the planning phase. If the expenditure looks like exceeding the planned value, then steps are taken to reduce the cost to bring it back in line with the plan Cost Reduction - Taking steps to reduce the amount of money spent on any activity or project
What is the difference between cost minimization and cost reduction?
bogo ka!
Need for costing?
1) for cost control 2) comparison of cost with other firms 3) for cost reduction
How are cost control and cost reduction schemes implemented in an organisation?
Lebari samuel. cost control is implemented by calling departmental heads on their spending and also be mindfull of the way you allocate fund.
Why is a decentralized system of justice an advantage in the US?
local control, cost reduction and less corruption.
Cost reduction and cost control techniques?
Controlling cost means monitoring and controlling updates and changes to costs, budget, and the cost baseline of the project. Monitoring and controlling costs has two dimensions to it: expenditure of project funds and the work performed as a result of those expenditures. One major aspect of cost monitoring and controlling is to determine the relationship between the expenditures and the accomplishments. The cost performance depends on this relationship. The other main aspect is to control the changes to the approved cost performance baseline
What are the cost reduction measures taken by manufacturing firms?
about cost reduction
What is the Difference between cost management cost control and cost reduction?
Cost Control simply means keeping cost within desired level or planned level and the essential mechanics of Cost control is budgeting and budgetary control. Cost reduction on the other hand is a deliberate attempt to lower the cost of business operation which in most cases could result in value trade-off. Cost Management however is that planned, organised, systematic cost restructuring programmes aim to ensure that cost is commensurate with the level of operation of an organization. It can also be defined as the planned effort to ensure that organization operates within cost effective and efficient zone without compromising quality or value. Therefore the key line dividing cost reduction and cost managemnet is the issue of value or quality. In the process of Cost Management Cost would be reduced but without compromising value but not all cost reduction process guarantees value retention. The success of any cost management effort is influenced by the cost management mindset and cost management technical skill capacity of the Manager. Today, given the importance of cost to the survival of organization, it has been advocated that there should be adequate capacity building in the skill to manage cost as well as a full institutionalization of the distinct practice of cost management as a discipline. This I subscribe to.
How much does liposuction breast reduction cost?
The cost of breast reduction through liposuction depends on the provider. However one would normally expect to pay between five thousand and ten thousand dollars.
What is cost of control?
By reduction in operating items and using recycle items then we can control cost by using those resources which we already used it example if the guest used half shampoo, and he threw it but at the same time if we collect it in large quantity and we refill it it reduce the cost.
