Open AccessThe Proactive Approach for Cost Control in Organizations
Author(s) -
Mitali Saxena
Publication year - 2022
Publication title -
international journal for research in applied science and engineering technology
Language(s) - English
Resource type - Journals
ISSN - 2321-9653
DOI - 10.22214/ijraset.2022.40761
Subject(s) - activity based costing , mistake , maximization , target costing , process costing , profit maximization , control (management) , operations research , profit (economics) , job costing , computer science , order (exchange) , operations management , business , risk analysis (engineering) , economics , product cost management , microeconomics , engineering , marketing , finance , cost engineering , artificial intelligence , political science , law
To run a company successfully, profit maximization is first and most important objective which can be simply achieved by cost minimization. In order to earn maximum profits, the cost of product should be minimized. We have two approaches with us to estimate and plan the upcoming costs i.e. Standard Costing and Budgetary Control. We calculate variances in standard costing by comparing standard costs with the actuals which makes it a reactive approach. On the other hand we prepare budgets (estimations) which are regularly monitored and compared with the actuals so that corrective action can be taken if required. This again makes the process reactive. In this research paper we will see whether mixing of these two approaches results into a proactive approach which will help companies make a decision before committing a mistake. Keywords: Standard costs, Actual costs, Budgeted costs, variances, proactive