What is Cost reduction? together with cost control
Cost control
Concept of cost control
Modern administration is becoming increasingly cost-conscious together with is constantly inward search of novel ways of controlling costs together with eliminating wastes. One of the footing objectives of cost accounting is to accomplish cost control. The effectiveness of cost job concern human relationship ting is jested primarily from the ex tern to whom it has been able to select virtually a command over the manufacturing together with other expenses.
The terminology of cost accountancy of the institute of cost together with administration accountants London, defines cost control' equally " the guidance together with rule yesteryear executive activeness of the costs of operating an nether taking, special where such activeness is guided yesteryear cost accounting."
In cost control, the starting fourth dimension stair is to set upward the target to endure achieved, i.e., the goal or objective to endure attained. The cost command scheme guides the organisation to range threat goal. For this purpose, budgets or standards are uses. These budgets or touchstone provides the yardstick against which actual cost together with performances may endure compared. If at whatever stage, it is noticed that the expenses are showing a tendency away from the goal, resulting thereby inward a variation from the target, the cost command systems assist to regulate this tendency together with to eliminate the variations. This guidance together with rule is yesteryear executive action, i.e., through an activeness taken yesteryear the executive who is responsible for the incurring of the expenditure. It should endure clearly understood that a cost accountants yesteryear him does non command the expenses. He exactly assists inward the command of expense since expenditures tin forcefulness out endure controlled solely yesteryear the somebody who insures the expenditure. The cost accountant brings to the notice of the executive concerned, the exact dot on which an activeness is required of him for regulating the expenses. Thus, cost command is the guidance together with rule through an executive actions together with this executive is exercised inward observe of all the expenses incurred inward operating an undertaking. Cost command comparisons all procedures together with measures yesteryear which the cost of carrying out an activity is kept nether cheque together with aims at ensuring that costs arrive at non teach beyond a for sure level.
Process/ steps inward cost control
Efficient organisation together with performance of cost command systems involves the next steps:
• Setting upward the targets.
• Measurement of the actual performance together with actual cost.
• Comparison of actual with the target to ascertain variances.
• Analysis of variances (between the target together with the actual) to their cause.
• Taking such corrective actions equally are necessary to eliminate the variations.
Tools together with technique of cost control
Cost command tin forcefulness out endure exercised yesteryear adopting the next tools together with techniques:
• Material control
• Labor control
• Overhead control
• Budgetary control
• Standard costing
• Capital expenditure control
• Productivity ratio
Cost reduction
Meaning of cost reduction
Generally, cost reduction agency to minimize together with command the expenses incurred. In other words, the aim of cost reduction is to encounter whether at that topographic point is whatever possibility inward bringing virtually a saving inward the cost incurred inward materials, labour, overheads etc.
Institute of cost together with administration accountants, London defines "cost reduction is to endure equally the achievement of existent permanent reduction inward the unit of measurement cost of goods manufactured or services rendered without impairing their suitability for the utilization intended or diminution inward the character of the product."
Thus, cost reduction agency an achievement of existent together with permanent reduction inward the unit of measurement cost of goods produced or services rendered without impairing their character or portion suitability.
The higher upward Definition brings out the next equally the essential features of cost reduction:
a. Reduction should endure real: the reduction must endure a existent i inward the course of study of manufacture of goods or services rendered through increment inward productivity.
b. Reduction should endure permanent: the reduction must endure permanent one. Reduction inward cost due to windfalls, reduction inward taxes due to modify inward authorities policy or whatever other fortuitous receipts arrive at non autumn inside the preview of cost reduction.
c. Quality or utility to endure maintained: the reduction should non endure at the cost of essential characteristic together with character or utility of the products or services rendered.
Advantages of cost reduction
The primary advantages of cost reduction may endure summarized equally follows:
a. Cost reduction increment the net of an task which ultimately provides a footing for to a greater extent than dividends to shareholders, higher charge per unit of measurement of bonus to staff together with retentivity of to a greater extent than net for the business.
b. Due to the increment inward profit, administration may pass to a greater extent than inward providing amenities to worker. It volition ensure to a greater extent than cordial human relationship betwixt administration together with workers together with the labor turnover.
c. Increase profitability of the task due to cost reduction adds it its goodwill.
d. Reaction inward the unit of measurement cost indicates improve productivity together with efficiency. The efficiency of a job solid may arrive at goodness the fellow member of the manufacture equally a whole.
e. Higher profitability volition ensure increased physical care for to the authorities yesteryear way of station.
f. Cost reduction may atomic number 82 to lower export prices resulting inward higher total experts.
Difference betwixt cost command an cost reduction
Cost command is the technique of minimizing the cost. The primary purpose of controlling the cost is to decrease per unit of measurement cost of production. The difference the 2 tin forcefulness out endure introduced equally follows:
Difference betwixt cost command an cost reduction
Cost command is the technique of minimizing the cost. The primary purpose of controlling the cost is to decrease per unit of measurement cost of production. The difference the 2 tin forcefulness out endure introduced equally follows:
Areas or scopes of cost reduction
The ambit of cost reduction is real broad together with it is non practicable to prepare the areas inward which cost reduction may endure applied fully. Any areas wherein costs are incurred has the ambit for cost reduction together with it should endure idea that at that topographic point is no ambit for cost reduction inward whatever special area. However, the next areas receive got the largest ambit of cost reduction:
a. product design
The pattern of the production provides the maximum ambit for cost reduction. Since production pattern is the starting fourth dimension stair inward production, cost reduction at this phase is probable to arrive at goodness throughout the manufacturing life of the product. Possible inward the reduction of cost should endure investigated, both, land improving existing pattern or introducing novel pattern or introducing novel designs. Some of the of import factors inward production improvement are:
• quality of the product
• Unnecessary weight, materials content, machine or labor operations.
• Waste together with losses to endure eliminated.
• Proper designing of the product.
b. Factory organisation together with production methods
Cost reduction Is affected to a bully extent yesteryear improving mill organisation together with production methods inward the cast of clear-cut lines of authorization together with responsibility, good defined channels of communications, coordination together with co-operation together with co-operation betwixt diverse executives, novel manufacturing techniques, novel process, novel production methods, etc.
c. Production planning together with control
Production planning also affects the cost reduction. The location together with lay-out of the mill receive got important influence on cost. Of Corse, the mill location cannot behaves together with so easily but its layout tin forcefulness out endure organized on centre scientific lines equally to equally trim down the cost of production.
The chartered institute of administration accounts, London, inward its publication on cost reduction, has set downwards the next principles for developing a audio production planning systems:
i. Production planning should endure based on realistic together with detailed sales forecast.
ii. Efficient production systems requires fullest possible job of suitable production facilities, elimination of unnecessary motion together with treatment of materials provision of adequate working instructions, drawings tools, etc. together with the most economical storage of stocks.
The pattern of a production systems is subject on its location because the resulting physical factors inward fluent layout together with also because of the fact that the location determines operating together with majuscule costs, inward together with so for equally physical factors of flora pattern are concerned, location may create upward one's hear the next costs:
1. Whether or non mightiness is to endure purchased.
2. The extent of AC or humidification required.
3. Whether local sub-contracting facilities for constituent are available or whether provision for the manufacturing of components has to endure made inward the factory.
4. Storage infinite requirements depending on the availability of raw materials inward the vicinity.
5. The types of transportation facilities available for receiving raw materials together with dispatching finished goods, etc.
From the standpoint of costs, transportation cost, labor costs, costs of nation s structure cost, etc. volition endure influenced yesteryear the location of the factory.
d. Administration areas
There is uncomplicated ambit of cost reduction inward this expanse because cost reduction is a top administration problem. Office should endure reorganized if at that topographic point is ambit for improvement inward the efficiency of persons engaged inward the office. Use of unnecessary from should endure avoided to salvage the cost of stationary together with labor cost involved for compiling them. Effort should endure made to trim down the expenses of telephone, lighting together with travelling g but non at the cost of efficiency.
e. Marketing areas
The diverse activities which tin forcefulness out endure bought nether the cost reduction programmers include marketplace search, promotion packing, warehouse, distributions, after-sales services etc. sales performance tin forcefulness out endure improved yesteryear marketplace ABC analysis of customers. Customers tin forcefulness out endure classified inward 3 categories A,B together with C. a category customers agency customers having virtually 10% if total dispatches but encompass virtually 70% of sales value, B category customers agency customers having virtually 20% of total dispatches but roofing virtually 25% of sales value together with C category customers agency customers having virtually 70% of total dispatches but roofing virtually 5% of total sales value. In this way of categorization of customers, sales efforts volition endure improve focuses together with at that topographic point volition endure reduction inward marketplace cost.
f. Finance areas
With the increasing hard inward procuring finance, administration should eliminate useless investment. To endure able to arrive at so, it must critically examine the amount of working majuscule together with fixed majuscule needed together with the fiscal convenience of reducing them. Wasteful utilization of majuscule utilization majuscule is equally bad equally inadequate capital. Over together with nether capitalization are both danger signals: what is needed is fair capitalization. Capital should endure procured at economical cost together with it should endure economically used together with so equally to give the maximum return. Fixed assets together with inventories which cannot endure economically used should endure sold; the coin realized. Fixed assets together with inventories which cannot endure economically used should endure sold; the coin realized from their sale should endure reinvested inward to a greater extent than profitable channels.
g. Purchase together with cloth control
1. Direct cloth cost reduction: straight cloth to a greater extent than frequently than non constitutes 50% of the cost of a product.
The next steps may endure helpful inward reducing cloth costs:
• Control should endure exercised on purchasing of raw materials. They should endure buy inward economical lost at economical prices from reliable dealers at appropriate times. The adoption of the japans exactly inward fourth dimension (JIT) techniques may greatly trim down the cloth costs.
• The diverse inventory command techniques, VIZ, fixation together with observance of inventory levels (maximum, minimum together with re-order levels) of inventory, ABC analysis, ageing schedule, perpetual inventory systems followed yesteryear continuous stock taking etc. should endure adopted.
• All efforts should endure made to avoid/ minimize losses together with wastage of raw materials. Economic should also endure maintaining inward treatment cost of raw materials.
2. Direct labor cost reduction: straight labor constitutes instant of import chemical element of the cost of a product. Cost reduction inward labor is possible through proper organisation together with functioning of the personnel, industrial plant study together with applied scientific discipline department's .the personnel subdivision is concerned with finding out the right hear for the right task together with the right man. The applied scientific discipline together with industrial plant study subdivision is concerned with task studies, fourth dimension studies together with displace studies. All these functions teach a long way inward reducing costs together with thus all efforts should endure made to discharge them with the intention to increment the productivity together with trim down costs.
3. Overhead cost reduction: the term overhead includes mill overheads. Office overhead together with selling together with distribution overheads. Considerable saving tin forcefulness out endure achieved inward the overhead costs through cooperation of the concerned executives at dissimilar levels together with creating a feel of witting with them equally examined below. The reduction inward administrative costs whether inward factory, business office or selling together with distribution divisions tin forcefulness out endure achieved through the next measures:
• Staff tin forcefulness out endure reduced yesteryear having evaluation of jobs.
• Utilization of mechanism together with equipment tin forcefulness out endure improved through systematic supervision.
• Productivity of workers together with executives tin forcefulness out endure increased through shine catamenia of work.
• Expenditure on printing, passage advertizing telephone tin forcefulness out endure reduced yesteryear exercising appropriate command measures.
Similarly, selling together with distributions costs tin forcefulness out endure reduced yesteryear examining the next suspects:
• Whether the channels of distribution are efficient together with economical.
• Whether distributional together with selling methods ensure promptness.
• Whether at that topographic point is an effective scheme of sales promptness.
• Whether the marketplace enquiry is adequate.
• Whether marketplace method both for domicile together with export merchandise are satisfactory.
• Whether at that topographic point are many possibilities of reducing the selling together with distribution costs without impairing the efficiency of the sales division.
Tools together with techniques of cost reduction
The diverse tools together with techniques used for achieving cost reduction are practically the same which receive got been suggested for cost control. Some of these are:
The ambit of cost reduction is real broad together with it is non practicable to prepare the areas inward which cost reduction may endure applied fully. Any areas wherein costs are incurred has the ambit for cost reduction together with it should endure idea that at that topographic point is no ambit for cost reduction inward whatever special area. However, the next areas receive got the largest ambit of cost reduction:
a. product design
The pattern of the production provides the maximum ambit for cost reduction. Since production pattern is the starting fourth dimension stair inward production, cost reduction at this phase is probable to arrive at goodness throughout the manufacturing life of the product. Possible inward the reduction of cost should endure investigated, both, land improving existing pattern or introducing novel pattern or introducing novel designs. Some of the of import factors inward production improvement are:
• quality of the product
• Unnecessary weight, materials content, machine or labor operations.
• Waste together with losses to endure eliminated.
• Proper designing of the product.
b. Factory organisation together with production methods
Cost reduction Is affected to a bully extent yesteryear improving mill organisation together with production methods inward the cast of clear-cut lines of authorization together with responsibility, good defined channels of communications, coordination together with co-operation together with co-operation betwixt diverse executives, novel manufacturing techniques, novel process, novel production methods, etc.
c. Production planning together with control
Production planning also affects the cost reduction. The location together with lay-out of the mill receive got important influence on cost. Of Corse, the mill location cannot behaves together with so easily but its layout tin forcefulness out endure organized on centre scientific lines equally to equally trim down the cost of production.
The chartered institute of administration accounts, London, inward its publication on cost reduction, has set downwards the next principles for developing a audio production planning systems:
i. Production planning should endure based on realistic together with detailed sales forecast.
ii. Efficient production systems requires fullest possible job of suitable production facilities, elimination of unnecessary motion together with treatment of materials provision of adequate working instructions, drawings tools, etc. together with the most economical storage of stocks.
The pattern of a production systems is subject on its location because the resulting physical factors inward fluent layout together with also because of the fact that the location determines operating together with majuscule costs, inward together with so for equally physical factors of flora pattern are concerned, location may create upward one's hear the next costs:
1. Whether or non mightiness is to endure purchased.
2. The extent of AC or humidification required.
3. Whether local sub-contracting facilities for constituent are available or whether provision for the manufacturing of components has to endure made inward the factory.
4. Storage infinite requirements depending on the availability of raw materials inward the vicinity.
5. The types of transportation facilities available for receiving raw materials together with dispatching finished goods, etc.
From the standpoint of costs, transportation cost, labor costs, costs of nation s structure cost, etc. volition endure influenced yesteryear the location of the factory.
d. Administration areas
There is uncomplicated ambit of cost reduction inward this expanse because cost reduction is a top administration problem. Office should endure reorganized if at that topographic point is ambit for improvement inward the efficiency of persons engaged inward the office. Use of unnecessary from should endure avoided to salvage the cost of stationary together with labor cost involved for compiling them. Effort should endure made to trim down the expenses of telephone, lighting together with travelling g but non at the cost of efficiency.
e. Marketing areas
The diverse activities which tin forcefulness out endure bought nether the cost reduction programmers include marketplace search, promotion packing, warehouse, distributions, after-sales services etc. sales performance tin forcefulness out endure improved yesteryear marketplace ABC analysis of customers. Customers tin forcefulness out endure classified inward 3 categories A,B together with C. a category customers agency customers having virtually 10% if total dispatches but encompass virtually 70% of sales value, B category customers agency customers having virtually 20% of total dispatches but roofing virtually 25% of sales value together with C category customers agency customers having virtually 70% of total dispatches but roofing virtually 5% of total sales value. In this way of categorization of customers, sales efforts volition endure improve focuses together with at that topographic point volition endure reduction inward marketplace cost.
f. Finance areas
With the increasing hard inward procuring finance, administration should eliminate useless investment. To endure able to arrive at so, it must critically examine the amount of working majuscule together with fixed majuscule needed together with the fiscal convenience of reducing them. Wasteful utilization of majuscule utilization majuscule is equally bad equally inadequate capital. Over together with nether capitalization are both danger signals: what is needed is fair capitalization. Capital should endure procured at economical cost together with it should endure economically used together with so equally to give the maximum return. Fixed assets together with inventories which cannot endure economically used should endure sold; the coin realized. Fixed assets together with inventories which cannot endure economically used should endure sold; the coin realized from their sale should endure reinvested inward to a greater extent than profitable channels.
g. Purchase together with cloth control
1. Direct cloth cost reduction: straight cloth to a greater extent than frequently than non constitutes 50% of the cost of a product.
The next steps may endure helpful inward reducing cloth costs:
• Control should endure exercised on purchasing of raw materials. They should endure buy inward economical lost at economical prices from reliable dealers at appropriate times. The adoption of the japans exactly inward fourth dimension (JIT) techniques may greatly trim down the cloth costs.
• The diverse inventory command techniques, VIZ, fixation together with observance of inventory levels (maximum, minimum together with re-order levels) of inventory, ABC analysis, ageing schedule, perpetual inventory systems followed yesteryear continuous stock taking etc. should endure adopted.
• All efforts should endure made to avoid/ minimize losses together with wastage of raw materials. Economic should also endure maintaining inward treatment cost of raw materials.
2. Direct labor cost reduction: straight labor constitutes instant of import chemical element of the cost of a product. Cost reduction inward labor is possible through proper organisation together with functioning of the personnel, industrial plant study together with applied scientific discipline department's .the personnel subdivision is concerned with finding out the right hear for the right task together with the right man. The applied scientific discipline together with industrial plant study subdivision is concerned with task studies, fourth dimension studies together with displace studies. All these functions teach a long way inward reducing costs together with thus all efforts should endure made to discharge them with the intention to increment the productivity together with trim down costs.
3. Overhead cost reduction: the term overhead includes mill overheads. Office overhead together with selling together with distribution overheads. Considerable saving tin forcefulness out endure achieved inward the overhead costs through cooperation of the concerned executives at dissimilar levels together with creating a feel of witting with them equally examined below. The reduction inward administrative costs whether inward factory, business office or selling together with distribution divisions tin forcefulness out endure achieved through the next measures:
• Staff tin forcefulness out endure reduced yesteryear having evaluation of jobs.
• Utilization of mechanism together with equipment tin forcefulness out endure improved through systematic supervision.
• Productivity of workers together with executives tin forcefulness out endure increased through shine catamenia of work.
• Expenditure on printing, passage advertizing telephone tin forcefulness out endure reduced yesteryear exercising appropriate command measures.
Similarly, selling together with distributions costs tin forcefulness out endure reduced yesteryear examining the next suspects:
• Whether the channels of distribution are efficient together with economical.
• Whether distributional together with selling methods ensure promptness.
• Whether at that topographic point is an effective scheme of sales promptness.
• Whether the marketplace enquiry is adequate.
• Whether marketplace method both for domicile together with export merchandise are satisfactory.
• Whether at that topographic point are many possibilities of reducing the selling together with distribution costs without impairing the efficiency of the sales division.
Tools together with techniques of cost reduction
The diverse tools together with techniques used for achieving cost reduction are practically the same which receive got been suggested for cost control. Some of these are:
• Value analysis or value engineering Work study
• Job evaluation or value merit rating Production planning together with control
• Organization together with method study Operations together with method study
• Rationalization Quality control
• Economic fellowship quality Use of improve technology
• Mechanization together with automation Standardization
• Simplification classification together with codification
• variety reduction improvement inward the pattern of a product
• market enquiry inventory administration together with control
Essentials for success of cost reduction programmers
Cost reduction programmers aims at improvements of human efforts at all levels of the organization, which assist inward reducing costs. It may endure a short-term or long-term program. Influenza A virus subtype H5N1 short-term programmer is undertaken for sorting out immediate problem; e.g., a job involving controlling wastages together with inefficiencies is for sure departments, which are probable to force upward the cost together with may also require majuscule expenditure. It involves setting upward of the target homecoming on majuscule employed together with developing a scheme for its achievement through diverse cost reduction measures:
The next are the essential requisites for successful implementation of a cost reduction programmer:
a. There should endure a separate cost reduction prison theatre cellular telephone responsible for proper planning together with implementation of the cost reduction programme.
b. There should endure an efficient scheme of administration reporting at all levels of management.
c. The programme should receive got back upward from the top management. It is a continuous physical care for and, therefore, should non endure allowed to degenerate into a routine affair.
d. There should endure an performance together with enquiry procedure.
e. There should endure unopen co-operation with dissimilar executives concerned with the programme. Each departmental caput should endure given a listing of the areas where he is expected to bear upon economies inward cost. Moreover, he should also endure encouraged to lay forrad his ain suggestions for improvement.
f. There should endure regular followed-up to the programme together with continuous appraisal of the programme performed with the actual cost reduction performance.
g. The programme should non endure confined solely to reducing costs but should also examine whether expenditure is actually required or not. In other words, at that topographic point should endure efforts to eliminate uneconomic together with unnecessary activities.
The next are the essential requisites for successful implementation of a cost reduction programmer:
a. There should endure a separate cost reduction prison theatre cellular telephone responsible for proper planning together with implementation of the cost reduction programme.
b. There should endure an efficient scheme of administration reporting at all levels of management.
c. The programme should receive got back upward from the top management. It is a continuous physical care for and, therefore, should non endure allowed to degenerate into a routine affair.
d. There should endure an performance together with enquiry procedure.
e. There should endure unopen co-operation with dissimilar executives concerned with the programme. Each departmental caput should endure given a listing of the areas where he is expected to bear upon economies inward cost. Moreover, he should also endure encouraged to lay forrad his ain suggestions for improvement.
f. There should endure regular followed-up to the programme together with continuous appraisal of the programme performed with the actual cost reduction performance.
g. The programme should non endure confined solely to reducing costs but should also examine whether expenditure is actually required or not. In other words, at that topographic point should endure efforts to eliminate uneconomic together with unnecessary activities.
1. Write the important of cost control.
Cost command is a scheme of cost accounting that aims at maintaining the cost inward accordance with the established targets or standards. It comparisons the fixation of standard, comparing the star with the actual together with taking corrective actions for whatever unfavorable deviation. It assumes the beingness of for sure standards or norms which are non challenged. Cost command lacks dynamism since it aims to attain lower possible costs nether existing circumstances it is a preventive function. Under it, costs are optioned earlier they are incurred.
2. Write the important of cost reduction.
Cost reduction is directed to explore the producing goods or providing services at lower costs. It does non receive got whatever specific process. Under it, the ways of reduction inward materials, labor together with other overheads are adopted. It is a corrective portion together with a continues physical care for together with recognizes no weather condition equally permanent. It assumes beingness of concealed potential savings inward the standards or norms which are thus bailiwick to constant challenge or improvement.
3. Write whatever 5 differences betwixt cost command together with cost reduction.
Cost command is the techniques of minimizing the cost. The primary purpose of controlling the cost is to decrease per unit of measurement cost of production. The difference betwixt the 2 tin forcefulness out endure introduced equally follows:
a. Purpose: cost command aims at maintaining the cost inward accordance with the established target or touchstone but cost reduction is directed to explore the possibilities of producing goods or providing services at lower costs.
b. Process: cost command comprises the fixation of standard, comparing the touchstone with the actual together with taking corrective activeness for whatever unfavorable divergence but cost reduction does non receive got whatever specific process. Under it, the ways of reduction inward receive got whatever specific process. Under it, the ways of reduction inward materials, labor together with other overheads are adopted.
c. Assumption: cost command assumes the beingness of for sure touchstone or norms which are non challenged whereas cost reduction assumes beingness of concealed potential savings inward the touchstone or moms which are the fore bailiwick to constant challenge or improvement.
d. Approach: cost command lacks dynamism since it aims to attain lower possible cost nether existing circumstances but cost reduction is a continuous physical care for together with recognizes no weather condition equally permanent.
e. Function: cost command is a preventive function. Under it, costs are optimized earlier they are uncured but cost reduction is a corrective function.
Cost command is a scheme of cost accounting that aims at maintaining the cost inward accordance with the established targets or standards. It comparisons the fixation of standard, comparing the star with the actual together with taking corrective actions for whatever unfavorable deviation. It assumes the beingness of for sure standards or norms which are non challenged. Cost command lacks dynamism since it aims to attain lower possible costs nether existing circumstances it is a preventive function. Under it, costs are optioned earlier they are incurred.
2. Write the important of cost reduction.
Cost reduction is directed to explore the producing goods or providing services at lower costs. It does non receive got whatever specific process. Under it, the ways of reduction inward materials, labor together with other overheads are adopted. It is a corrective portion together with a continues physical care for together with recognizes no weather condition equally permanent. It assumes beingness of concealed potential savings inward the standards or norms which are thus bailiwick to constant challenge or improvement.
3. Write whatever 5 differences betwixt cost command together with cost reduction.
Cost command is the techniques of minimizing the cost. The primary purpose of controlling the cost is to decrease per unit of measurement cost of production. The difference betwixt the 2 tin forcefulness out endure introduced equally follows:
a. Purpose: cost command aims at maintaining the cost inward accordance with the established target or touchstone but cost reduction is directed to explore the possibilities of producing goods or providing services at lower costs.
b. Process: cost command comprises the fixation of standard, comparing the touchstone with the actual together with taking corrective activeness for whatever unfavorable divergence but cost reduction does non receive got whatever specific process. Under it, the ways of reduction inward receive got whatever specific process. Under it, the ways of reduction inward materials, labor together with other overheads are adopted.
c. Assumption: cost command assumes the beingness of for sure touchstone or norms which are non challenged whereas cost reduction assumes beingness of concealed potential savings inward the touchstone or moms which are the fore bailiwick to constant challenge or improvement.
d. Approach: cost command lacks dynamism since it aims to attain lower possible cost nether existing circumstances but cost reduction is a continuous physical care for together with recognizes no weather condition equally permanent.
e. Function: cost command is a preventive function. Under it, costs are optimized earlier they are uncured but cost reduction is a corrective function.
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