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Cost Control

and
Cost Reduction
Topics:
 Meaning of Cost Control
 Elements of Cost Control Scheme
 Essentials for success of Cost
Control
 Advantages of Cost Control
Definition:

-The Chartered Institute of Management


Accountants, London defines Cost
Control as:

“The regulation by executive action of the


cost of operating an undertaking
particularly where such action is guided
by cost accounting.”
Cost Control aims at reducing
inefficiencies and wastages and
setting up predetermined costs and
in achieving them.
Elements of Cost Control Scheme:
Set down a standard/ target.
Select a yardstick.
Ascertain the actual performance.
Compare the actual performance.
Analyze the variances by causes.
Take corrective action.
Periodically review the standards.
Essentials for success of Cost
Control:
Firm should have definite plan of
organisation.
Costs should be collected for each
of responsibility.
Report should draw management’s
attention.
Good performance should be
rewarded.
Proper setting of standards.
Advantages of Cost Control:
Achieving the expected return of
capital
Increase in productivity of the
available resources
Job opportunity
Economic use of limited resources
of production