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Difficulties in cost reduction
1) Resistance by employees to pressure to reduce cost usually because the nature and purpose of the campaign has not been properly explained to them and they feel threatened by the change
2) They may be confined to a small area the business 9e.g to one department) with the result that cost are reduced in one cost centre only to reappear as an extra cost in another cost centre;
3) Efforts to cut material and labor cost may erode confidence in established system for estimating material usage and labor productivity standards;
4) Cost reduction campaigns are often introduced as a rushed desperate measure instead of a carefully organized exercise.
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Determine the Inputted cost It is hypothetical cost required to be considered to make costs comparable. It is the owner of the factory charges rent of the factory to the cost
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