Question

Management has told you that they want to reduce total costs of operations and SG&A by 10%. What types of reports would you look at to make these decisions?

Answer 1

Cost controlling and its reduction totally depend upon the efforts made by the business manager to monitor,evaluate and cut down expenditures. Such efforts are made usually under well defined company programs for individual or a department. Cost controlling is important to such an extent for a basic reason of time and money constraint. Decision making for cost control evolves following reporting:

Planning and Control: Business managers first plan the way they want their employees to perform then they compare and contrast their respective plans with the actual performance. Planning evolves basically two types of control machanism , one is feedforward which provides basis of control at the point of action and second is feedback which provides a basis of effectiveness of control after implementation.

Control Reports: Control reports provide adequate amount of information so that management may determine reasons for any cost variances from original budget. Management is said to perform effectively only if the said standards and goals are acheived.

Standards: At the start of fiscal year it is the duty of the management to formulate budget which provides standards. On comparing the actual results with the standard and calculating variances allows manager to focus on the areas which require attention and thus acheive cost reduction.