Cost control and cost reduction are two techniques which are used by the company management to decrease the expenses on the production of the products. To maximize the profit, it’s very necessary to minimize the cost of the product. Cost control is the process in which product cost is matched or compared with the standard. Cost reduction is the process in which product cost is reduced by the neglected unproductive activities, and without decreasing its quality. Cost of the product is very important for any business. Cost and quality plays an important role in the success of the any business. Generally, if cost is reduced in that case quality of the product effects.
And when the quality of the product is increased the cost of the product also increase. In this case management uses cost reduction tool to minimise the cost of the product without decreasing the quality of the product. Both these tools cost control and cost reduction is very useful to generate the revenue and profit. So if you are a business person it’s very important to understand the concept of cost control and cost reduction. In this article we will discuss in detail and major difference between cost control and cost reduction.
Cost control vs cost reduction
| Sr. No. | Cost Control | Cost Reduction |
| 1 | To maintain standards | Main aim to continuously reduce the cost of the product.
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| 2 | Fixed a least possible cost as standard cost | No least cost exist |
| 3 | Ends by achieving standard cost | Never ending Process. |
| 4 | Cost is controlled by the comparison with the past and the present | No comparison is done with past only focus on the present and future |
| 5 | Temporary | Permanent |
| 6 | May affect the quality of the product | No compromise with the quality.
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| 7 | Focus to reduce the total cost | Focus in the unit cost of the products.
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Cost control
It is a process in which unit cost of the product is compared and analysed with the standards. In the cost control process some steps are involved. First a standard cost is fixed for a product. After that comparison done with standard cost and the actual cost of the product. And then find the difference between standard cost and the actual cost.
After that If a difference is available between standard cost and actual production cost in that case complete analysing the all production steps to find why there is difference in the standard and actual cost. After that a remedial and corrective action is taken to clear the difference between standard cost and actual cost. This is the method companies want to equalise the actual cost with standard cost of the product. In this tool if after the analysis. management find that the fixed standard is high in that case standard is changed and fixed a new standard. Cost control is a continuous process.
Cost reduction
In simple word cost reduction is a process in which companies reduce product cost without doing any compromise in the quality of the product. Main step which is involve in the cost reduction is continuous research and eliminate the production steps which do not makes any change in the production of the product. Cost reduction first principal is that neither a cost of the product is last it can be reduced. Simple means that cost reduction is a never ending process. Main steps of the cost reduction which makes it very effective is the continuous research on the product production.
In research of the product cost concern person finds the way to reduce the cost of the product without doing any compromise with the quality of the product. The reduction in the product cost should be permanent this permanent reduction is cost reduction. If the reduction is done only for some time that is not consider cost reduction.
How to reduce cost
Product production is done in the steps or process. So in the manufacturing of the process many process and the machines are used. The person who do research on the cost reduction find which activity has possibility to do changer or replacements. Which are helpful or effective to reduce the cost per product. In this process it is find that which activity or machine provides the value for the product. Which step or activity doesn’t provide any value to the product that activity is eliminated. Or some time two works of the product production is conducted by one activity or machine. By doing these type of changes cost reduction is done.
These day new method and machinery is used to reduce the cost of the per unit products. Many expenses reduce which occur during the production storing and selling of the products.
Main differencee between cost control and cost reduction
- Cost control is to maintain standards. While in cost reduction main aim to continuously reduce the cost of the product.
- In cost control we fixed a lease possible cost as standard cost. While in cost reduction no least cost exist.
- Cost control ends by achieving standard cost. Cost reduction is never ending.
- Cost control cost is controlled by the comparison with the past and the present. While in cost reduction no comparison is done with past only focus on the present and future.
- Cost control is temporary while cost reduction is permanent.
- Cost control may affect the quality of the product. But in cost reduction no compromise with the quality.
- Cost control focus to reduce the total cost while cost reduction focus in the unit cost of the products.
Conclusion
Cost control and cost reduction are two effective tools which are used to decrease the production cost of the product. These days’ companies focus on the revenue and profit. For that many tools are used but these cost control and cost reduction is very useful. Cost control leads to match the standard cost which is fixed by the company. While cost reduction is the reduction in the cost of the product by change the manufacturing process and by eliminating the unnecessary activities which are involved in the manufacturing.
This is all about the cost control and cost reduction. We hope this article clear all your doubts. In case of any kind doubt please feel free to comment on us. For more interesting topics like this please go through our website.
Cost control
It is a process in which unit cost of the product is compared and analysed with the standards.
Cost reduction
In simple word cost reduction is a process in which companies reduce product cost without doing any compromise in the quality of the product.
Main differencee between cost control and cost reduction
Cost control is temporary while cost reduction is permanent.
Cost control may affect the quality of the product. But in cost reduction no compromise with the quality.