Impact of Cost Control on Manufacturing Industries : Attention must be called to the fact that in the long run all costs are controllable. Variable costs are generally controllable over short time periods. Some fixed costs, such as supervisory labor or equipment rental, can also be terminated on short notice while other fixed costs, depreciation of fixed assets or a long-term lease agreement, involve a fixed commitment over a longer period of time.
Under the scheme of Cost Control On Manufacturing Industries, some costs possess a dual short and long-run controllability characteristic. For example, a five-year contract as to the price of a raw material, representing a long-run commitment is not immediately controllable and the contract may be negotiable only at a higher management level.
However, waste and spoilage of the same material is immediately controllable by the department. Generally, a department manager should be well enough informed to be able to explain cost variances even though the control or certain aspects of the control do not all within his or her scope of authority and responsibility.
The data, steps, and methods presented below are based on the the previous discussions. There the annual factory overhead of four producing departments and four service departments was estimated, and product costing rates (factory overhead rates) were calculated after the indirect departmental expenses and service department costs had been apportioned and distributed.
At the end of the year annual actual factory overhead was compared with applied factory overhead, and departmental spending and idle capacity variances were determined.
Cost Control on Manufacturing Industries does not mean to say Cost reduction, meaning just our current position with respect to the Budget.
Accountant’s specialty is in the cost control function is important to the entire planning process. The adjustment and interpretation of data allows for changes to be made as and when necessary as regards the standards and control of variances.
