Cost Control during Production...

Cost Control during Production  The broad definition of costs is related to the economic resources necessary to accomplish work activities or to produce work outputs. Usually, costs are expressed in terms of units of currency. Therefore, costs are the amount of money representing the resources spent for the production of output. A resource is a physical entity that is required to be able to execute a certain operation. Resources can be e.g. machine and equipment, raw materials, utilities, tools, fuel and energy, but also operators and consumables. Outputs are the products and byproducts. The success of an organization largely depends on the profit that it can realize. The profit is determined by the costs that are made and the extent to which these costs are recovered. Therefore, it is essential for the organization to know all the costs so that it is able to control them. Cost control is a managerial effort to attain cost goals within a particular environment. Cost control is not a specific program. Rather, it is a routine activity carried out continuously. Cost must be controlled; otherwise, there will be wastage and misappropriation. Cost control is an important activity for any efficient organization since it has a major impact on the profitability of the organization. The costs throughout the entire organization are to be known to the management so that it can be used for the purpose of decision making. Therefore, it is necessary to integrate the cost information in the management process. For this a system is needed that can support the management with the cost data and hence in controlling the cost. According to Liebers the cost control component can be broken into four functions namely cost estimation, production monitoring, cost calculation and evaluation, and cost modeling. The...