MANAGEMENT STUDENT OF AIMIT, BANGALORE

1. Cost Control
&
Cost Reduction

2. Cost Control
Def:- The process of monitoring and regulating the
expenditure of funds is know as cost control.
In other words , it means to regulate/control the operating
costs in a business firm.

3. Features of Cost control
Cost control process involves setting targets and
standards, ascertaining the actual performance,
comparing the actual performance with standard,
investigating the variances and taking corrective
action.
It aims at achieving the standard.
It is a preventive function.
In cost control, costs are optimized before they are
incurred.
It is generally applicable to items which have
standards.

4. Aspects Of Cost Control
1)Planning:- Initially a plan or set of targets is
established in the form of budgets and standards.
2)Communication:- The next step is to
communicate the plan to those whose
to implement the plan.
3)Motivation:- Motivation is defined as the process
that initiates, guides and maintains goal-oriented
behaviors.

5. 4)Appraisal and Reporting:- comparison has to be
made with the predetermined targets and
performance. Deficiencies are noted and
is started to overcome deficiencies.
5)Decision-making:- Finally, corrective actions
and remedial measures are taken or the set of
targets are revised, depending upon the
administration’s understanding of the problem.

6. Main Areas of cost control
 Materials
 Labor
 Overheads
 Sales
 Energy

7. Advantages cost control
 It helps the firm to improve its profitability and
competitiveness.
 It helps the firm in reducing its costs and thus reduce
its prices.
 It is indispensable for achieving greater productivity.
 If the price of the product is stable and reasonable, it
can maintain higher sales and thus employment of

8. Disadvantages of cost control
 Reduces the flexibility and process improvement
in a company.
 Restriction on innovation.
 Requirement of skillful personnel to set
standards.

9. Cost Reduction
Def:-The process of identifying and
eliminating unnecessary costs to improve the
profitability of a business is know as cost
reduction.

10. Features of
Cost reduction
 Cost reduction is not concerned with setting targets and
standards. Cost reduction is the final result in the cost
control process.
 Cost reduction aims at improving the standards.
 It is continuous, dynamic and innovative in nature,
looking always for measures and alternative to reduce
costs.
 It is a corrective function.
 This is applicable to every activity of the business.

11. Difference
COST CONTROL
a) Prevention
action(Tries to keep
costs confined to the
limits set by norms)
b) It is the means to an
end, namely cost
reduction
c) Emphasis the
present and past
COST REDUCTION
a) Corrective
Action(permanent
reduction in the unit
cost of goods mfg.)
b) It begins where cost
control ends
c) It emphasizes partly on
present costs and
mainly on future costs
d) It is a dynamic concept

12. Contd…
Cost control
e)Establishing budget
and/or standard and
initiating remedial
action where there is
a deviation of actual
results
f)Limited applicability
g)Tools of technique-
budgetary control,
Cost Reduction
e)Establishing by
improving upon the
standards and the
methods of
production
f)Universal applicability
g)Tools of technique-
value engineering,

13. THANK YOU