Cost control and budgetary control are both essential because they permit management to plan ahead and to know when to make changes in order to fulfill the plan related to the operation of a modern industrial unit.
Necessity and Importance of Cost Control
- Cost accounting helps control of expenditure or cost.
- Cost control leads to efficiency in use of material, machinery and labor.
- The profit making capacity of a business is guided by the efficiency with which various costs are controlled.
- Cost control provides a basis for minimizing the cost or cost-reduction.
- Costs and accounts are classified to make clear the nature of expenditure or cost. Cost control works through a comparison of actual costs against predetermined standards as regards material, labor, etc.
- Cost control and hence cost reduction is necessary in order to
- stand in competition in a specific product line
- reduce the selling price of a product to broaden its market.