What are the principles of production cost management?

Production cost management is to truly reflect the cost of products through cost calculation and analysis, and strengthen cost management through cost control to achieve the purpose of reducing costs and improving economic benefits. Production cost management is a necessary part of modern enterprise market competition. In order to reduce the production cost, it is important to use high-tech and update the equipment in production besides using efficient management means to improve efficiency. Only by applying scientific and technological achievements to production can we give full play to its productivity function, create more economic benefits for enterprises and indirectly create more social benefits.

Principles of production cost management:

Reducing the production cost is one of the necessary means to enhance the core competitiveness of modern manufacturing industry, but how to effectively and systematically reduce and control the cost is not a simple matter. Based on the latest mature theoretical research results and my work practice and experience, this paper holds that production cost management should follow the following three basic principles:

First of all, the principle of distinguishing standard cost centers from non-standard cost centers.

The essence of enterprise production cost management is a kind of performance management, that is, performance evaluation behavior. Performance evaluation can be divided into cost center, profit center and investment center according to what managers are responsible for. A cost center is a unit in an enterprise, and its goal is to meet the lowest cost requirements. The profit center aims at net profit, and the investment center aims at return on investment. As the cost center, the production department of an enterprise should distinguish between the standard cost center and the non-standard cost center, that is, the cost center, and assess the costs incurred separately.

The standard cost center is a stable and clear responsibility center for the products produced, and the input required for the unit products is already known. Usually, the typical representatives of standard cost centers are manufacturers, workshops, sections, teams, etc. In manufacturing activities, each product can have clear quantitative standards and price standards for raw materials, labor and manufacturing costs. Therefore, the evaluation index of standard cost center is the standard cost under the condition of given product quality and quantity.

Non-standard cost centers, that is, cost centers, are usually used to manage units whose output cannot be measured by financial statements, or whose input is not closely related to output. These units include production management departments and senior management departments of enterprises. Usually, cost budget is used to evaluate the cost control performance of cost centers.

Second, the principle of combining cost difference investigation with cost difference correction.

Production cost management is not only performance management, but also behavior management. It not only needs to distinguish between standard cost centers and expense centers, but also needs to provide cost control reports. At the same time, effective cost management also needs to pass the difference survey. Find out the reasons for the deviation and put forward the measures to correct the deviation. The cost control report can only make people notice the performance of deviating from the target, and can only point out the clues of the problem. In order to get the actual effect of reducing costs, only through investigation and study can we find out the reasons and distinguish the responsibilities, and then we can take corrective measures. There are many reasons for the deviation, which can be roughly divided into three categories:

1, the reasons of the person subjected to execution, including fault, inexperience, low technical level, poor sense of responsibility, uncooperative, etc.

2, the goal is unreasonable, including the original goal is too high or too low, or the situation changes so that the goal is no longer applicable.

3. There are problems in actual cost accounting, including errors in data recording, processing and summary, deliberate fraud, etc. The cost index is comprehensive, and no matter which production operation or management operation goes wrong, the cost will be out of control. Measures to correct deviation usually include:

1, re-establish indicators or modify indicators;

2. Take organizational measures to redistribute tasks or further clarify responsibilities;

3. Select and train competent personnel or replace competent personnel by means of personnel management;

4. Improve guidance and leadership, give subordinates more specific guidance and implement more effective leadership.

Third, the principle of giving consideration to absolute cost control and relative cost control.

Production cost management must also break through the concept of "department", that is, production cost management is an integral part of the whole enterprise cost management. Production cost management should not only consider controlling absolute cost, but also consider reducing relative cost from the perspective of the development strategy of the whole enterprise.

Absolute cost control is usually called "cost control", and its principles can include the following four items:

1, economic principle.

Refers to the cost incurred due to the implementation of cost control, and should not exceed the income lost due to lack of control. In order to establish a certain control, it needs a certain amount of manpower or material resources and pays a certain price. This cost should not be too large and should not exceed the cost saved by establishing this control.

The principle of economics requires that cost control is feasible. Only by properly planning, organizing and leading the work to correct the deviation from the target can the cost control system be proved to be useful.

The principle of economics requires the implementation of the principle of "exception management" in cost control, which can simply control normal costs and expenses, paying special attention to various exceptions. For example, investigate major deviations from the standard and establish approval procedures for expenditures exceeding the budget.

Economic principles require that the cost control system should be flexible. In the face of changed plans and unforeseen circumstances, the control system can still play a role and will not become a useless "display" when the market changes. 2. The principle of adjusting measures to local conditions. It means that the cost control system must be personalized, suitable for the actual situation of specific enterprises, departments, posts and cost projects, and cannot copy others' practices.

The characteristics suitable for specific enterprises refer to large enterprises and small enterprises, old enterprises and new enterprises. Fast-growing and relatively stable enterprises, enterprises in this industry and enterprises in that industry, as well as different stages of development of the same enterprise, should be different in management focus, organizational structure, management style, cost control methods, bonus forms and so on.

To meet the requirements of specific departments, that is, the cost formation process of sales department, production department, technology development department, maintenance department and management department is different, and the methods of formulating control standards and implementing control are also different. Requirements suitable for post and post responsibility mean that general manager, factory director, workshop director and team leader need different cost information. They should be provided with different cost control reports.

The characteristics applicable to cost items refer to the detailed items of material cost, labor cost, manufacturing cost, management cost and capital expenditure. There are different properties and uses, and the control methods are also different.

3. The principle of full participation. Cost control is the common task of all employees, which can only be accomplished through the joint efforts of all employees. In order to arouse the enthusiasm of staff cost control, we need to pay attention to the following issues: (1) We need to have objective, accurate and applicable control standards. (2) Encourage employees to participate in setting standards. (3) Let employees know the difficulties and actual situation of the enterprise. (4) Establish appropriate incentive measures. (5) calmly deal with cost overruns and negligence.

4. Leadership principles. Because cost control involves all employees, it is not a popular thing and must be promoted by the top leaders. The requirements of cost control for enterprise leaders are: (1) Pay attention to and fully support cost control. (2) Have the determination and confidence to achieve the cost target. (3) Have the spirit of seeking truth from facts. (4) Set an example and strictly control the cost of its own responsibility. Reduce relative costs, also known as "cost reduction". Refers to continuous efforts to continuously reduce costs. The existence of competitors urges every enterprise to continuously reduce costs and constantly strive to improve performance.

The principles of reducing relative costs usually include:

1, customer-centric principle. We must plan the delivery time, quality and cost of products in a unified way. At the same time, faster, better and cheaper. It is necessary to reduce the cost without affecting the product quality. The reduction of product cost does not allow shoddy.

2, the principle of activity-based cost analysis. Reducing costs not only refers to reducing production costs, but also requires reducing the costs of other operations of enterprises, such as research and development, design, marketing, distribution, after-sales service and so on. Reducing costs not only means reducing production and other operating costs. It is also necessary to reduce management costs and financial costs. Reducing costs is not only to reduce the cost of the enterprise itself, but also to consider the costs of suppliers and customers.

3. Pay attention to the principle of product unit cost. Because the increase or decrease of total cost is related to the increase or decrease of capacity utilization rate, the real cost reduction refers to reducing the unit cost of products.

4. We should reduce the cost by our own efforts. Changes in market prices and tax cuts will also lead to cost reduction, but the fundamental way to reduce costs lies in the efforts of enterprises themselves to reduce costs.

5. Continue to reduce costs. Reducing costs should not be an expedient measure, but should be the fundamental policy of enterprises and should be carried out continuously.

Reducing relative cost means "doing the right thing", and controlling absolute cost means "doing the right thing". Under the condition of modern market economy. We must base ourselves on the external environment and the overall development strategy of the enterprise, reduce the relative cost and control the absolute cost.

To sum up, the three principles are used to organize the production cost management of modern manufacturing enterprises "macroscopically". It is expected to form a "cost advantage" of enterprises and improve their core competitiveness.