THE EFFECT OF COST REDUCTION TECHNIQUES AND PRODUCTIVITY IN MANUFACTURING FIRM

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THE EFFECT OF COST REDUCTION TECHNIQUES AND PRODUCTIVITY IN MANUFACTURING FIRM

CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

Cost control is the practice of managing and /or reducing business expenses. Cost control starts by the business identifying what their cost are and evaluate whether those cost are reasonable and affordable, thereafter if necessary, they can look for ways to cut costs through methods such as cutting back, moving to a less expensive plan or changing services providers. To be profitable companies must not only earn revenues, but also control costs. If the costs are too high, profit margin will be low making it difficult for a company to succeed against its competitors. Brumbaug (2008) was of the opinion that companies should watch the cost and the profit will take of itself.

Cost control in an integral part of any business venture.  No firm will stay in the business if it does not employ prudent means of checking its costs by ensuring that they don’t over surpass the estimated costs projections.  If costs are not checked properly the outcome can be negative to smooth running of the business. Hamilton and Martha (2007) opined that for cost control purpose a budget provides standard cost. Company management must match budgeted and actual costs and strive to ensure that they always remain within the estimated projections.

Many organizations have strived to ensure that its core objective is to maximize profits and minimize cost.  It is precisely the assumption that the manufacturing industry like many other industry players have initiated cost control measures to ensure it operate in a cheaper and more efficient manner without compromising on quality service delivery and therefore  Costs must be controlled by all means possible to achieve the needed output and increase revenues.

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