Question

If your company has effective cost management policies in place, what advantages your company will have over its rivals? Briefly explain (about 200 words in total) three such advantages in your own words.

Answer 1

Cost Management as it derives by its name can be defined as management of costs related to any project, business or manufacturing. Cost management include all techniques, accounting and forecasting methods related to costs. It helps business in projecting and controlling costs so overall profitability of a business may rise. So one can define Cost Management as a management of costs which include all aspects related to costs of a business i.e. forecasting, controlling, accounting etc.

Advantages of Cost Management

1. Cost Management helps in forecasting Costs.

2. Cost Management helps in Controlling Costs.

3. Cost Management helps in recording of cost which enables a enterprise to analyze the costs.

4. Effective procurement of resources such as material, labor etc.

5. Makes easy for management to choose the best cost effective option among the available options.

6. Cost Management is effective in analyzing various unworthy activities.

1. Forecasting

Cost Management is helpful for a company in forecasting costs related by applying budgeting techniques. A company may forecast it future costs by making a budget for them and can see the future in present and may take wise decision. So it is helpful in forecasting.

2. Controlling

Cost Management may benefit a company in controlling costs by applying techniques such as variance analysis which makes a company helpful in achieving it predetermined goals and targets of costs which is ultimately will enhance profit of the company.

3. Effective procuring of recourses

Cost management inherits various techniques for the resources such as material, labor etc. which determines such as storage of material, payment techniques of labor, batch size, and order size. Determining above effectively will result into increased profitability of company.

4. Recording of costs a integral part of cost management which makes recording and analyzing of costs easy.

So above description tells us about cost management and its advantages .