Cost Control Aspect

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Aspects of Cost Control: Cost control involves the following steps and covers various aspects of management. It has to be brought in the following manner: (i) Planning: Initially a plan or set of targets is established in the form of budgets, standards or estimates. (ii) Communication: The next step is to communicate the plan to those whose responsibility is to implement the plan. (iii) Motivation: After the plan is put into action, evaluation of the performance starts. Costs are ascertained and information about achievements is collected and reputed. The fact that the costs are being reported for evaluating performance acts as a prompting force. (iv) Appraisal:…show more content…
It also helps in coordination. Thus budgetary control can play five important roles in an organisation. The following are the characteristics of budgetary control: (i) Planning: Budgetary Control forces managers to plan their activities of the each department of the enterprise. Since budgetary control is duly concerned with concrete numerical goals, it does not leave any ambiguity regarding the targets. It leads to a cautious utilisation of resources since it keeps a rigid check over activities in the organisation. It also contributes indirectly to the managerial planning at higher levels. (ii) Co-ordination: Budgetary control system promotes co-operation among various departments in the organisation. The system encourages exchange of information among various units of the organisation. The system promotes balanced activities in the organisation. (iii) Recording: Budgetary control enables to keep up-to-date records of all activities of the business unit as a whole. A budget can be defined as a numerical statement expressing the plans, policies and…show more content…
It pinpoints any deviation between budgeted standards and actual achievement. It also points out the reasons which may be responsible for deviation between budget and actual. (v) Corrective Actions: Budgetary control ensures corrective actions as the basis of deviations for better results. It helps in directing, counselling, guiding and supervising in a co-ordinated manner so this improves the overall performance of the business unit. Advantages of Budgetary Control: The following are the main advantages of budgetary control system: (i) Budgetary control integrates and brings together all activities of the enterprise right from planning to controlling. (ii) Budgetary control provides a yardstick against which actual results can be compared. (iii) Budgetary control provides a clear definition of the objectives and policies of the concern. (iv) Budgetary control is a useful tool in profit-planning. (v) Budgetary control helps to eliminate or reduce unproductive activities and minimising waste. (vi) Budgetary control makes everyone accountable for his work, as it defines the responsibility for
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