Cost Reduction Essay

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UNDERSTANDING IMPACT OF COST CUTTING AND THE COST OF THAT IMPACT

“COST CUTTING is the achievement of real and permanent reductions in the unit cost of the goods manufactured, or services rendered without impassing their stability for the use that is intended.” -ICWA London-

Cost reduction can be done by reducing the cost per unit, or by increasing productivity. The process of reducing costs is as follows:
1. Compile business expense statements
2. Analyze operating expenses
3 Present recommendations for identified cost savings and expense reduction
4. Implement cost reduction and analysis recommendations

Cost reduction programs may require a bulk amount of research and development budget, but once a new technique is introduced, …show more content…

Cost Reduction is a technique used to save the unit cost of the product without compromising with its quality.
Focuses on minimization of wastage Focuses on minimization of cost through new production process, improved plant layout and scientific material handling
Cost control is routinely applied on a continuous basis. Cost reduction is applied when an opportunity for cost reduction arises which offers advantage for a longer time.

Cost control heavily relies on accounting techniques. Cost reduction may not involve the use of accounting technique.
Cost control is operated through setting standards or targets and comparing actual performance therewith, Cost reduction is a continuous process of critical cost examination, analysis and challenge of standards.
Takes corrective action in order to ensure that future performance conforms to standards or norms Each aspect of business products, process, procedures, methods, organization personnel is critically examined and reviewed with a view of improving efficiency and effectiveness and reducing the

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