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  Overheads Cost Reduction

Introduction to Overheads Cost Reduction

The term overhead involves factory overheads, office overheads and selling and distribution overheads. Substantial saving can be acquired in the overhead costs by cooperation of the concerned executives at dissimilar levels and making a sense of cost consciousness amongst them like described below. The reduction in administrative costs whether in office or selling, factory, and distribution divisions can be acquired by the following measures:

(i) Staff can be reduced through comprising evaluation of jobs.

(ii) Use of machinery and equipment can be enhanced by systematic supervision.

(iii) Productivity of workers and executives can be raised by smooth flow of work.

(iv) Expenditure on printing, postage and telephone can be decreased through exercising appropriate control measures.

Likewise, selling and distribution costs can be decreased through examining the following aspects:

(i) Whether the channels of distribution are proficient and economical.

(ii) Whether distribution and selling techniques make sure promptness.

(iii) Whether there is an effective system of sales promotion.

(iv) Whether the market research is sufficient.

(v) Whether there is several possibilities of reducing the selling and distribution costs with no impairing the efficiency of the sales division.

(f) Finance Cost Reduction. Finance is also a significant area in which cost reduction is feasible through the following measures:

(i) Control over use of finance meant for both working capital and fixed capital requirements.

(ii) Appropriate evaluation of capital expenditure and consequently control.

(iii) Profitable employment of capital along with the objective of getting maximum return.

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