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Saturday, February 19, 2011

Cost Reduction Areas

Following are the main differences between cost control and cost reduction:

1. Focus

Cost control focuses on the minimization of wastage than the reduction of cost. Cost reduction focuses on minimization of cost through new production process, improved plant layout, scientific material handling etc.

2. Basis Of Application

Cost control is routinely applied on a continuous basis. Cost reduction is applied when an opportunity for cost reduction is identified which offers a competitive advantage for a longer time.

3. Use Of Accounting Techniques

Cost control heavily relies on accounting techniques. Cost reduction may not involve the use of accounting technique.