Let’s Understand Cost Control
“Cost control helps in pinpointing the factors leading to losses. If the causes of loss are ascertained, it becomes easy to control them. The reasons for profits can also be established. ”
Cost control is a control of all the costs of an endeavor in order to achieve cost efficiency in business operations. Cost can be classified as fixed cost, variable cost, semi variable cost etc. The fixed costs are incurred over a period of time and are not straightforwardly related to production.Variable cost on the other hand changes in the proportion of output. Semi-variable costs are fixed as well as variable in nature. Some costs may be incurred continuously, others now and then and still others only deemed to be incurred. There may be diverse techniques for recording cost of an assortment of products.
In each method, categorization, recoding and allotment of expenses may be done in a different way. In every method there will be a system where divergence in budgeted cost and actual cost will be reported to the concerned officials for taking remedial actions.
The cost standards are predetermined for each products or action and actual costs records are also sent to the in charge of the product or activity. In case of any difference in cost, urgent corrective measures are taken up. The regular cost control structure helps in keeping costs under check. Cost control system helps in discovering resourceful and inefficient operations.
The activities, which are not cost-effective, can either be stopped or efforts for improving them can be made. On the other hand money-spinning activities can be encouraged. Cost control system records make available important information for submitting tenders or quoting prices of goods or services.
It helps in pinpointing the factors leading to losses. If the causes of loss are ascertained, it becomes easy to control them. The reasons for profits can also be established. It helps in keeping a check on inventories.
There is a proper system of receiving, storing, issuing and using of materials and other stores. Cost records become a foundation for scheduling upcoming production policies.
Author - DeeKay
This article was created by DailyOjo staff. Report Spam/Abuse