COST CONTROL, COST REDUCTION AND COST MANAGEMENT

 

COST CONTROL, COST REDUCTION AND COST MANAGEMENT

Edu-Visor Update 11-02-2022

Most of us usually get confused to understand the meaning of these terms or we underestimate their importance but these three i.e. cost management, cost reduction and cost control are actually the major pillars under costing, if we talk about standards or profit (which is the ultimate motive of a business). But, in this article we are going to know how these terms are actually beneficial to us and what these terms actually refers

What Cost Management, Cost Control and Cost Reduction refer:

Cost Management is the process of planning and controlling the budget of a business. Having a good cost management system in place will allow organizations to better estimate and allocate budget. Cost management is a form of management accounting that allows a business to predict impending expenditures to help reduce the chance of going over budget.

After Cost Management, the other two terms came into effect, they are cost control and cost reduction.

Cost Control is a process which focus on controlling the total cost. It is a practice which works to align the actual cost in agreement with the established norms(standards).

It ensures that the cost incurred on production should not go beyond the predetermined cost. Thereafter we evaluate the actual performance. After that we compute the variances between the actual cost & the budgeted cost. we find out the reasons for the same. Finally, we implement the necessary actions for correcting discrepancies.

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Team Edu-Visor

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