FACULTY OF ECONOMIC AND ADMINISTRATIVE

SCIENCES
ACCOUNTING SCHOOL

“COST MANAGEMENT”

STUDENT:

CRUZALEGUI SANTILLANA DANA PAMELA

TEACHER:

PAULO CESAR CACERES IGLESIAS

COURSE:

STRATEGIC FINANCIAL PLANNING

CHIMBOTE - PERÚ

(2024)
 INTRODUCTION

In business, cost management is an essential pillar for the success and viability
of any organization. Costs, at their core, represent the monetary value of all
resources required to produce goods or services. From raw material
procurement to labor compensation and general operating expenses, every
aspect of costs directly impacts a company's profitability and efficiency.

To understand the importance of cost management, it is crucial to recognize

that every expense, large or small, contributes to an organization's financial
structure. The ability to identify, classify and control these costs is critical to
making strategic decisions and optimizing business performance. Companies
that effectively manage their costs are able to improve their efficiency, set
competitive prices and evaluate their performance more accurately. This
management not only enables companies to survive in competitive markets, but
also to prosper and grow.

costs can also be analyzed as total and unit costs. Total costs represent the
sum of all expenses incurred in the production of a given number of units, while
unit costs reflect the average cost per unit produced. This analysis is crucial to
understand the impact of large-scale production on costs and to define effective
pricing strategies.
 DEVELOPMENT

Ramos Salazar, Jesús (2014) tells us:

The direct cost is the sum of the costs of materials, labor (including social laws),
equipment, tools, and all the elements required for the execution of a work.
These direct costs that are analyzed for each of the items that make up a work
may have varying degrees of approximation according to the proposed interest.
However, further refinement of these costs does not always lead to greater
accuracy because there will always be differences between the various cost
estimates for the same item. This is due to the different criteria that can be
assumed, as well as the experience of the engineer who prepares them. (p. 16)

It is important to highlight the different cost classifications.

- Product costs and period costs.

Product costs: Costs that can be capitalized in an inventory; they
correspond to the book value of something tangible.

Period: Those that must be compared with the revenues of the period in
which they are incurred. Related to what we call expenses. Costs
related to the production of a service should be considered as
cost of the period.

- Direct and indirect costs.

Direct Costs: Any cost for which a direct, precise and clearly measurable
relationship can be established with the product of which it is a part.

Indirect Costs: It is very complex and costly to measure the amount

consumed by each product of the supervisor's hours, lubricants applied
to each machinery, etc. And therefore they are not fully identified
with each product.

- Fixed and variable costs.

 Fixed Costs: They are presented independently of the volume of
production, services rendered or units sold.
Variable Costs: Also called direct costs, they are those that change in
direct relation to the volume of production.

- Obligated fixed costs and discretionary fixed costs.

Mandatory fixed costs: Those that the company is obliged to incur as a
consequence of having a certain installed capacity.

Discretionary Fixed Costs: Those in which managers wish to incur in

order to achieve certain objectives.

- Controllable and non-controllable costs.

Controllable Costs: This refers to the control capacity that the person in
charge of a division or department can exercise over a certain cost
(expense). These costs can be decided whether they are incurred or not
and in terms of their amount.
Non-controllable costs: These costs are not directly affected and will be
generated regardless of whether or not you want to control them.
 CONCLUSION

- Cost management is an essential skill that goes beyond simple cost

reduction. It is a strategic discipline that encompasses optimizing
resources, improving operational efficiency and preparing for sustainable
growth. Organizations that embrace robust cost management are better
positioned to thrive in an increasingly complex and challenging business
environment. Thus, the ability to manage costs effectively becomes a key
driver of long-term success and competitiveness.
- Effective cost management not only impacts immediate profitability, but
also builds a foundation for sustainability and future growth. Companies
that master cost management are better equipped to navigate economic
turbulence and capitalize on emerging opportunities. By optimizing
resources and maintaining a lean cost structure, these companies can
reinvest in innovation, expand into new markets and strengthen their
competitive position.