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Chapter: Principles of Management : Controlling

Cost control

Cost control is the measure taken by management to assure that the cost objectives set down in the planning stage are attained and to assure that all segments of the organization function in a manner consistent with its policies.

COST CONTROL

 

Cost control is the measure taken by management to assure that the cost objectives set down in the planning stage are attained and to assure that all segments of the organization function in a manner consistent with its policies.

 

Steps involved in designing process of cost control system:

 

            Establishing norms: To exercise cost control it is essential to establish norms, targets or parameters which may serve as yardsticks to achieve the ultimate objective. These standards, norms or targets may be set on the basis of research, study or past actual.

 

            Appraisal: The actual results are compared with the set norms to ascertain the degree of utilization of men, machines and materials. The deviations are analyzed so as to arrive at the causes which are controllable and uncontrollable.

 

            Corrective measures: The variances are reviewed and remedial measures or revision of targets, norms, standards etc., as required are taken.

 

Advantages of cost control

 

Better utilization of resources

 

To prepare for meeting a future competitive position.

 

Reasonable price for the customers

 

Firm standing in domestic and export markets.

 

Improved methods of production and use of latest manufacturing techniques which have the effect of rising productivity and minimizing cost.

By a continuous search for improvement creates proper climate for the increase efficiency.

 

Improves the image of company for long-term benefits.

 

Improve the rate of return on investment.


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