There is more profit in cost control when business is good than when business is bad.The amount of effort put into cost control tends to increase when business is bad and decrease when business is good.It is easier to keep costs down than it is to bring costs down.It is useful to bear in mind the following rules covering cost control activities: Potential savings in individual businesses will, however, vary between wide extremes depending upon the levels of efficiency already achieved before cost controls are introduced. In practice, cost control will ultimately be achieved by looking into both these aspects and it is impossible to assess the contribution, which each has made to the overall savings. For example, if sales can be increased with the same amount of expenditure, say, on advertising and salesmen, the cost as a percentage of sales is cut down. Naturally, cost control is and will continue to be of perpetual concern to the industry.Ĭost control has two aspects such as a reduction in specific expenses and a more efficient use of every rupee spent. In effect, cost control would mean a reduction in the percentage of costs and, in turn, an increase in the percentage of profits.
Cost control by management means a search for better and more economical ways of completing each operation. In fact, cost control is an essential element for the successful operation of a business.
The firm should therefore aim at doing whatever is done at the minimum cost. Very often, the selling price is not within the control of a firm but many costs are under its control. Profit depends upon the difference between the selling price and the cost of production. The long-run prosperity of a firm depends upon its ability to earn sustained profits.
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