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Cost Controls for Managing Profitability (Expense Minimisation (Budgets,…
Cost Controls for Managing Profitability
Cost Centres
A department in a business that contributes to business expenses categorised into; direct costs, indirect costs
Indirect Costs
are those costs that cannot be associated with a specific product and are fixed
Example
Administration
Rent
Direct Costs
are those costs associated with a specific product and are variable
Example
Raw materials
Transport
Expense Minimisation
Budgets
Making the business more efficient
Removal of unnecessary staff or products
Automation
Fixed and Variable Costs
Fixed
Costs that are constant and do not change based on output
Rent
Variable
Costs that vary and depend on the level of output
Raw materials