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Difference between Cost control and Cost reduction
Cost control refers to regulating costs to stay within budgeted limits through setting targets, measuring performance, and investigating variances. Cost reduction aims to permanently lower unit costs through waste reduction and increased efficiency without compromising quality. While cost control focuses on maintaining standards, cost reduction challenges standards to find potential savings through continuous improvement efforts. Cost control is preventative, while cost reduction is corrective and can find additional savings even with efficient cost control.
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Difference between Cost control and Cost reduction
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- 3. Cost Controlis defined as the “the guidance and regulations by executives action of the cost of operating and undertaking . cost reduction is defined as an achievement of real and permanent reduction in the unit cost of goods manufactured or services rendered without impairing their suitability for the use intended.”
- 4. The costcontrol represents the efforts where cost reduction represents achievement. Cost reduction is a continuous attempt towards improvement.
- 5. Cost Control impliesthat 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.
- 6. The processof 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
- 7. Cost control assumesexistence 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.
- 8. Cost control isa preventive function; costs are optimised 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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