COST REDUCTION

PROGRAMME
PRESENTED BY
JESSIN JOY
COST REDUCTION PROGRAMME
 A cost reduction programme is a plan to cut
expenses in order to improve profits or cash
flows.
 It is more likely to be targeted at discretionary
costs, which are those costs that do not have a
short –term impact on company performance such
as maintenance and employee training costs.
 Long-term cost reduction plans improve major
reductions in costs and may involve capital
expenditure.
  No cost reduction programme can be effective unless
a joint effort is made by all the departments concerned
and the plan is linked with responsible management.
 The Cost Reduction Program (CRP) allows
companies to meet budget and achieve a healthier cost
base, while creating a lasting competitive advantage. 
 Cost reduction should not be confused with cost
control.
FEATURES OF COST REDUCTION
 Cost reduction is not concerned with setting targets and
standards. Cost reduction is the final result in the cost
control process.
 Cost reduction aims at improving the standards.

 It is continuous, dynamic, and innovative in nature,

looking always for measures and alternatives to reduce
costs.
 It is a corrective function.

 This is applicable to every activity of the business.

 It adds thinking and analysis to action at all levels of

management.
COST REDUCTION TECHNIQUES

 Budgetary Control
 Inventory Control
 Standard Costing
 Job Evaluation and Marit Rating
 Reduction in variety of products
 Value Analysis
 Uniform Costing
 Intra-inter firm Comparison
 Operational Research
 Productivity
 BUDGETARY CONTROL
Budgetary Control is a tool for management used to plan, carry
out and control the operations of business.
 INVENTORY CONTROL

Inventory control or stock control can be broadly defined as

“the activity of checking a shop’s stock.
 STANDARD COSTING

Standard Costing is a technique which uses standards for costs

and revenues for the purpose of control through variance
analysis.
 JOB EVALUATION AND MERIT RATING
Job evaluation define as “a practice which seeks to provide a degree
of objectivity in measuring the comparative value of jobs within an
organization and among similar organizations”.

Merit Rating will insure control and adjustment of pay differentials

within categories, according to the relative merit of employees, or
will guarantee a fair distribution of bonuses.

 VALUE ANALYSIS
Value analysis is one of the important tools of modern management
in the area of cost reduction. Value analysis is the process of
systematic analysis and evaluation of various techniques and
functions with a view to improve organisational performance
 UNIFORM COSTING
Uniform Costing is the use by several undertakings of the
same costing principles and/or practices.

 INTRA-INTER FIRM COMPARISON

Intra-firm technical efficiency involves computing a particular
firm’s technical efficiency degree over time taking the firm-
specific production frontier as the reference frontier.

 OPERATIONAL RESEARCH
Operational Research can also be regarded as a scientific
approach to the analysis and solution of management problem.
 PRODUCTIVITY
Productivity may be defined as the ratio between the
production of a given commodity measured by volume
and one and more of the corresponding input factors also
measured by volume.
THANK YOU