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Cost Control Definition And Management Accounting Essay

A good knowledge about costs is vital in order to better understand what cost control is about. Authors have defined costs in different ways. The definition of cost was the money that was to be spent on production in the 1970`s (Van der Schroeff et al., 1970). This definition was later re-analysed and confirmed by Bilkerbeek(1992), van`t Klooster(1992) and Horgren(2005). Costs are the factors of production like raw materials, labour and machines that are used in production activities. The monetary value associated with these factors is called costs ( Bilkerbeek at al., 1992).
Another definition was the monetary value of the resources that a company sacrifices and from which goods are produced to satisfy customer need when sold is called costs. However, it is not necessary that cost in monetary values equals to payments (van`t Klooster et al., 1992). Lastly the sacrifice of resources that an organisation must do to produce goods and services, usually measured in terms of monetary units is cost (Horgren et al., 2005).
2.2 Cost control definition The most common problem that many industries are facing nowadays in the cutting of costs is how to control costs. There is no exact rule or definition of cost control. The definitions and meanings of cost control have evolved with time due to changes in the business environment and ideologies of entrepreneurs. Below are some of the definitions of cost control:-
Cost control is defined as the way through which the measurement of sales and manufacturing performances are carried through the establishment of guidance and set of rules of internal operations of an organisation by means of modern costing methods (Stanford, 1948). While on the other hand, Jackson (1974) defined cost control as a mean to discover and correct defects and weaknesses of operations, in order to reduce wastage and decrease costs.
In simpler terms, cost controls refer to keeping the expenses in limits.
2.3 Cost management Cost management is among the most important activity in an organisation which has an impact over the business functions in a company. There are arguments that imply that cost management is another factor that is likely to level up competitive advantage. Usually, cost management is described as the approaches and activities of executives and top level managers in the short run and long run planning and control decisions to increase customer satisfaction as well as reduce costs of production (Potter, Libby, Libby and Short, 2009). However to attain the desired results, managers need statistical figures and costs of the actual performance of the business to compare them with the planned budget performance in order to supervise and control costs (Crossman, 1953).
Moreover, the argument that Davila and Wouters (2004) put forward was that opportunities of cost reduction resulting from cost management would also indulge organisation generating huge profits. Organizations would benefit from efficient management of product cost in the sense that the latter will increase productivity and margin of resources (Rayburn, 1989).
Thus, only after an identification and classification of activities and processes that generate costs the efforts of cost management will be successful. Hence controlling of costs can be done by only altering the nature and extent of processes. Cost management should not simply restrict itself to cost cutting as there are cost management techniques as well which focuses on other paths towards improvement of organizations outcomes (Trussel

What is conceptual framework of accounting

Financial Accounting Standard Board defines Conceptual Framework as ‘a coherent system of interrelated objectives and fundamentals that is expected to lead to consistent standards. The rules are set in accounting standard that are formulated from the framework, but it takes preferences over the framework during the time of conflict of interpretation. Conceptual framework is a type of intermediate theory which attempts to connect all aspect of inquiries such as, defining a problem, purpose, data collection