cost control


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cost control

the task of controlling all items of expenditure by regular and frequent comparison of actual costs with predetermined budgeted or standard costs, identifying the causes of deviations of actual cost from standard, and taking corrective action to minimize such deviations. With regard to materials cost, deviations from planned materials usage can occur through excessive usage of raw materials for the output achieved or defective production leading to high scrap rates. With regard to labour cost, deviations from planned labour hours can occur, for example, through idle time caused by production bottlenecks. With regard to overheads, deviations from planned production-overheads per unit of product can occur because expenditure on overhead items exceeds budget or because actual output was less than planned. See MATERIALS COST VARIANCE, LABOUR COST VARIANCE, STANDARD COST, PRODUCTION MANAGEMENT, PRODUCTION CONTROL, BUDGETARY CONTROL, VARIANCE ANALYSIS.