Cost Management

Cost Management

Actual cost reporting is an effective method when a company is small but in case of large companies, actual cost reporting is not an easy task. So a formal cost management system is required for such firms.

A cost management system is a system used to plan and control the decisions taken by an organization regarding the cost generating activities so that the production cost can be lowered and product value can be enhanced. Cost management provides data that helps the management of the company to take short term as well as long term decisions related to the use of materials, change in product design and plant processes. Effective cost management helps in making decisions that will improve short term profits and long term position of the company in the market.

The common cost management systems are

• Job Order Costing system
• Process Costing System
• Activity Based Costing System (ABC)

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