Cost Management

Cost Management Cost management is a complex process related to the cost and expenditure. It facilitates cost control and cost reduction. All types of organizations, whether manufacturing, service or trading, require management of cost to control various activities. Cost management is an internal reporting system and provides the detailed cost information that management needs to control current operations and for planning of the future. It helps management to understand the costs involved in running of the organization and in taking decision on the appropriate course of action which are based on cost efficiency and capability. Modern cost management originated during the industrial revolution, when the complexities of running a large scale organization led to the development of systems for recording and tracking costs to help the management. Cost management is the process for effective planning and controlling the costs involved in an organization. It is an integral part of the overall management. It is considered to be one of the most challenging tasks of the management since the performance of the organization depends on how effective is its cost management. The process of cost management involves cost sheets which are prepared taking into account various activities such as collecting, analyzing, evaluating and reporting cost statistics. Cost sheets aims at computing cost of production in a scientific manner and facilitate cost control and cost reduction. The information available in cost sheets is used for budgeting, estimating, forecasting and monitoring of the costs. By implementing an effective cost management system, overall budgeting of the organization can be brought under control. In cost management, cost classification is basically based upon the basis of functions, activities, products, process and on internal planning and control as well as information needs of the organization.  The basic elements of the cost include...