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Cost Control and Cost Reduction

Cost control implies guidance a reputation of cost by executive action. For this purpose, the executives are provided with some yard stick such as standards or budgets with which the actual costs and performances are compared to ascertain the degree of achievement made.

Therefore Cost Control involves continuous comparisons of actual with the standards or budgets to regulate the former. Standards or budgets once set up are not attended during the period or until some mistakes are discovered in standards.

Cost reduction is the achievement of real and permanent reduction in unit cost of products manufactured. It, therefore, continuously attempts to achieve genuine savings in cost of production distributing, selling and administration. It does not accept a standard or budget as or fined. It rather challenges the standards/budgets continuously to make improvement in them. It attempts to excavate, the potential savings buried in the standards by continuous and planned efforts. Cost control relax that dynamic approach, it usually dealt with variances leaving the standards intact.


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