Cost Control
Strategic cost control is crucial in enhancing organizational effectiveness, efficiency, and overall performance and increasing the profit margins. Cost control is an essential decision tool that befits the organizational goals instead of external standards of financial reports that follow specific principles, guidelines, and rigidities. Also, this system enables a firm to evaluate its crucial success factors useful in cutting costs, increasing efficiency, and facilitating a competitive edge. These techniques help to ensure the company gains a competitive advantage over its rivals. Approaches applied to cost control include activity-based costing, business intelligence systems, target costing systems, and value chain analysis. Global competition makes organizations develop strategic cost control systems that produce a competitive edge over their competitors. Effective cost control and management lead to the creation of mechanisms that enhance a company’s efficiency and consequently improve the profitability of the firm. The need to consolidate every cost related to a specific product from its raw material to its end product influences the selection of an effective cost management system. Life cycle cost management provides the administrators with every non-recurring, recurring, indirect, direct, and other costs associated with a particular product. That includes every estimated cost in product design, design development, manufacturing, processing, support, and subsequent maintenance of the new product over its expected lifetime. Effective cost control entails amortizing every cost incurred in the process. This process is crucial for manufacturers who are contemplating introducing a new product or opening up a foreign branch. The system helps the company to evaluate the feasibility of the new project and its related costs to aid in planning and resource mobilization. Developing maintenance costs is essential for the firm to determine the sustainability of the project based on its design. In essence, an effective cost control system covers every cost incurred as well as projected costs in every phase of the proposed product’s life cycle.