Business Organizations need to carry out profitable operations in order to survive. If an organization cannot make enough profit, it would gradually go out of business. So it is question of survival and that is why it is very important.
You can only control costs if you already worked out standard costs and a system of recording actual cost. Afterwards, one can findout difference or variance between standard cost and actual cost and it could further analysed if the variances resulted from controllable factors or uncontrollable factors like inflation, changes in government regulation or any other factor not under the control of business organization. If variance is due to uncontrollable factor, some safeguards are taken for dealing the matter in future. Inflation can be controlled through making advance purchasing, Just-in-Time inventory management or setting aside a cash reserve for un-expected inflation.
If the factors were controllable, action can be taken against those who have not done their duty well.
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