Question

Do you think there is more focus on cost control and management when the economy is weak? Do you agree that this type of economy makes the managerial accountant role that much more important?

Answer 1

Above statemeny is correct , as profit can be increased by only two methods

1) Increasing price

2) Reducing cost

And when economy is weak price can not be increased as no one will be wiiling to buy at higher price and will switch to alternative products availabe at lower price.

So only way to maintain market share is by reducing cost and hence cost control and management plays an importan role when economy is weak.

when the economic condition are not favourable cost and management account has to asses the complete situation .

While surveying how the economic downturn will affect your business cost and management account should assess as to:

• How will our clients carry on – will they exchange down to the least expensive

model in the range, buy a similar item less regularly, or look for a

substitute item or administration?

• How will our rivals respond – will they work with clients to reengineer their items, look to keep up volumes by cutting costs, or

look for collusions to lessen advertise rivalry?

• What do we have to do well to limit the effect of the downturn

on us – play to the quality of our current client base as opposed to

try to extend, center around those clients well on the way to flourish in troublesome

Cost control is an important fixation for any business. In great occasions notwithstanding, it is much of the time subjected to the objectives of development and improvement. In a downturn, cost control and cost decrease must be a prime focal point of the executives who should begin with a clear sheet. Supportable cost decrease includes moving from your present cost base to a lower cost model. This will include a principal reappraisal of the plan of action in all its angles, and will require continued administration responsibility over an impressive time. For the time being, the speediest course to cost decrease is to target optional use – isolate the fundamental from the attractive and breaking point outgoings appropriately. In the medium term, cost decrease must originate from assessment of the current cost base and an evaluation of the worth got from each huge cost class. This audit ought to consider the degree of cost in every aspect of the business and afterward try to distinguish where investment funds are conceivable. Seriously investigate acquisition, at wasteful work rehearses, at squander. A key activity at this stage is to build cost cognizance all through the business, get individuals included and reward quantifiable commitments. In the more extended term, cost decrease will include driving down the business make back the initial investment point to as low a level as could be expected under the circumstances – making costs variable instead of fixed so as to limit defenselessness to a downturn. This will include analyzing pretty much everything – the market the business ought to focus on, the item or administration offering, the open doors for redistributing or sub-contracting make, the allure of bringing together or re-appropriating support capacities, improving the administration data framework, upgrading compensation approaches. This sort of progress can't be accomplished in weeks or months, however the dangers introduced by the downturn will convince all partners of the requirement for normal reevaluation.