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How to Control Overheads

When we study the cost accounting controlling tools, we know the tools for controlling our total cost instead of controlling only overheads. If overheads are increasing, we have to concentrate on control of overheads because without this, we can unable to sell products at competitive rates.





1. To Reduce Carrying Cost 

When we transport our material, we have to pay carrying cost. We can reduce this cost with following ways.

a) Never overload on vehicle. You see often in India, trucks or tempus which are on the roads in accidental position due to overloading. With this, your vehicle repairing cost will increase. Make standard for total loading.

b) If your vehicles are old, sell it and use new vehicle. It will decrease maintenance cost.

c) Proper number of employees should be appointed for carrying the material in vehicles. It should be enough to relax other worker. Otherwise, number of accidents will increase.

2. To Reduce Electricity Cost 

We are seeing that electricity business is going to private hands. So, electricity cost is increasing day by day. We can reduce this cost with following tips.

a) Use lighting bulbs which use low electricity.

b) Use solar energy.

c) Minimum use of ACs.

d) Build plan in such a way that natural light covers whole production plant. Use of transparent fiber sheet can reduce the of lighting in a day.

3. To Reduce the Cost of Indirect Labour 

Office staff's salary is one of important part of overhead. We can reduce the cost not by demotion of employees but with following tips.

a) Make the export to your employees. They will decrease the wastage or do with more productive.

b) Develop the skills of employees for multi-task within small period. With this, we need less employees.

c) Motivate to the employees for telling cost reducing ideas.

4. To Decrease the Cost of Communication 

You can reduce the cost of communication by effective use of online conferencing and emails. With this, you can decrease the number of mobile calls. Less mobile calls means less bill of recharge.

5. Proper Use of Wastage

If you want to learn one thing from Japan, then you can learn the way of using wastage from them. They do not send anything without use. But by efficient and proper use of wastage, they try to decrease the cost of overheads.

 For example

A company who produces ready-made garments. There may be lots of scrap clothes during the production. Company should produce carpets from these scrap clothes. With this, overhead cost will decrease.

6. To Reduce the delay of Material Supply

Create good relationship with supplier. With this, you can get your raw material fastly. Pay the bills of credit on time. It will increase your goodwill in the minds of suppliers.

7. To Use Trend Analysis for Monitor the Overhead Cost 

How can a doctor treat a patient when he do not know what and where is the disease in human body of patient. Like this, without knowing  which overhead cost is increasing, how can we take steps to control them. So, use trend analysis of statistics. If you do not know this, you can learn at here.  

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Accounting Education: How to Control Overheads
How to Control Overheads
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