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Summary Unit 4 Distinction Assignments
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Unit 4 Distinction Assignments
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Unit 4 Assignment B:Apprentice Name: Nicole Senyurt
Company : Micro-engines Ltd Company
Cost control:
What is cost control?
Before we begin explaining the reasons why cost control is essential to business
organisations, I will briefly explain what cost control is and how it works. Cost
control is the business practice which involves recognising and lowering
expenses in order to increase profitability and this stems from the budgeting
process. This also involves the company owner comparing the company’s
financial results alongside the budgeted expectations and if the actual costs are
higher than what we wanted in the first place, then management has the data
they need in order to proceed with their action.
What is involved in cost control?
Why do we use cost control?
As an engineering company, it is crucial that we use cost control because it helps us to
yield profit and maintain it since we could not be successful without its aid. When
implementing cost control into practical use, it helps to evaluate and control the costs
within the company like for example take the example of our manufacturing of valves for
the gas sector. When looking at this product, we must think about costs which include
raw material, staff management and running the manufacturing plant and the product,
, packaging and shipping the product to the customers. Therefore, by considering that we
need to manage these costs of the making and shipping of the valves, we need to also
think about how this will help us to gain profit as the income we earn from selling the
product must be able to cover manufacturing costs whilst on the side to earn money.
Secondly, it is crucial we use cost control because if we want to earn profit, we must
consider other companies within the same sector because we as a company want to earn
profit whilst competing others. Therefore, by observing the other companies’ costs of
similar products to ours, we must strategize in an effective way and use cost controls in
order to try and make our own product’s price competitive. This ensures us to
understand that it is crucial to have a balance between yielding profit and competitive
pricing, so it is essential that as a company we get our costing right and with the aid of
cost control it is achievable.
Thirdly, it is fundamental that we use cost control because if we do not examine our
costs in full detail we could miss out on important details. If we take the example of our
valve's manufacturers, we need to reflect upon the costs needed such as energy cost
required to run the machine plants and of the commodities needed to keep the machines
and incurred costs which occur when the machine is out of operation due to
maintenance. Therefore, by having an accurate and effective cost control it allows the
company to be successful as the company can improve and adapt easily to new cost
control in the future.
Yet whilst reflecting upon the reasons for cost control , we need to understand that
alongside doing that we need to also make careful decisions on cost that concern a few
factors:
• Firstly starting with investment ,as a company we have to think about investing
sufficient money when developing and manufacturing the product before we can think
about yielding profit from selling the valves as there could be a sign of risk. When
deciding how we are going to invest the money and how much we plan to do so, we need
to contemplate this against how much profit we could realistically earn from the sales or
we could consider or not whether it is worth it or not investing in the valves because we
do not want to fail as a company when launching our products or else we could not work
in the long run.
• Secondly we have to think about withdrawal because if the valves we produce are not
allowing us a company to earn profit , then we have to decide that it is cost-effective to
withdraw the valves in order to save additional production costs including manufacturing
cost and raw material cost. By using this method, we are able to elaborate upon this and
think about saving more money and invest upon a new product in the future that would
help us to gain more profit and even could beat others on the market.
• Lastly, as a company there may be a few cases where we get a third party organisation
involved in the manufacturing of the valves as it could be cheaper there than the
manufacturing of the actual valve itself. This is to ensure that with the aid of cost control,
it again helps to save money and help the company to invest money upon something
greater in the future. And that this could help the company to budget and save far more
effectively than other competitive companies out there.
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