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Difference between cost control and cost reduction

Difference between cost control and cost reduction are as follows:-

1. Cost Control is defined as the “the guidance and regulations by executives action of the cost of operating and undertaking while cost reduction is defined as and achievement of real and permanent reduction in the unit cost of goods manufactured or services rendered without impairing their suitability for the use intended.”

2. The cost control represents the efforts where cost reduction represents achievement. Cost reduction is a continuous attempt towards improvement. 

3. Cost Control implies that cost should not exceed the budgeted or standard limits. If it exceeds, investigation is necessary. Cost reduction means waste reduction, expenses reduction and increased production.

4. The process of cost control is to set a target ascertain actual performance and compare it with the target, investigate the variances and take remedial measures. Cost reduction is not concerned with maintenance of performance according to the standards. 

5. Cost control assumes existence of standards or which are not challenged. Cost reduction assumes the existence of concealed potential savings in the standards or norms which are, therefore subjected to a constant challenge with a view to improvement by bringing out the saving.

6. Cost control is a preventive function; costs are optimissed before they are incurred. Cost reduction is a corrective functions. It operates even when an efficient cost control system exists. There is room for reduction in the achieved cost under controlled conditions.
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