Cost Control, Value Analysis, and Waste Management Study Guide

Quiz

Answer each question in 2-3 sentences.

1. What is the primary difference between cost control and cost reduction?

2. Briefly explain the "DARSIRI" method of value engineering.

3. Identify three main areas of cost control within a business.

4. What are the three primary ways value can be increased in a product or service?

5. Explain why variance analysis is an important part of cost control.

6. Name three general techniques for cost-cutting.

7. Describe the three main steps in the waste hierarchy.

8. What are the main advantages of using plastic in road construction?

9. How can the design of a product impact its overall cost?

10. What is the main goal of value analysis?

Quiz Answer Key

1. Cost control is a proactive process of monitoring and regulating costs against a standard,
whereas cost reduction is a reactive process focused on identifying and eliminating
unnecessary expenses to improve profitability. Cost control works toward an established goal,
while cost reduction tries to lower that goal.

2. The DARSIRI method is a systematic approach to improve the value of a product. It emphasizes
reconsideration of cost and quality, with a focus on product function, esteem, and cost through
data collection, analysis, brainstorming, investigation, and recommendation.

3. Three main areas of cost control include materials, labor, and overheads. These areas
represent key resource expenditures in the business and are targeted for monitoring and
optimization to manage overall spending.

4. Value can be increased by either retaining the existing value and reducing cost, retaining the
cost and increasing value, or increasing cost to a lesser extent than the value gained. These
methods work to make a product or service more competitive.

5. Variance analysis is an important part of cost control because it compares actual performance
against planned behavior and identifies discrepancies between budget and actual costs,
allowing for corrective actions to be implemented to stay on target.

6. Three general techniques for cost-cutting include using electronic communication, outsourcing
computer maintenance, and using Skype for phone calls, all of which aim to reduce overhead
and improve efficiency.

7. The three main steps in the waste hierarchy are reduce, reuse, and recycle. This framework
prioritizes minimizing waste at the source, followed by repurposing materials, and then
reprocessing them into new products to reduce landfill use and environmental impact.
 8. The main advantages of using plastic in road construction are increased resistance to water,
reduced cracking and potholes, and lower maintenance costs, which also provides a way to
reuse waste products.

9. The design of a product can significantly impact its overall cost through choices in materials,
complexity, and manufacturing processes. These design choices can lead to higher or lower
expenses in material usage, production, and waste.

10. The main goal of value analysis is to increase profit by identifying areas of high cost in the
manufacturing of a product or service and finding ways to reduce or eliminate unnecessary
costs without affecting performance or quality.

Essay Questions

1. Discuss the advantages and disadvantages of cost control, providing specific examples to
support your points. How might these factors influence a company's decision to implement
strict control measures?

2. Compare and contrast value analysis and cost reduction, exploring the different
methodologies and objectives of each. How can both of these strategies contribute to a
company’s competitive advantage?

3. Analyze the various methods of waste disposal, focusing on their effectiveness, environmental
impact, and cost-benefit. What are the potential implications of choosing one method over
another?

4. Examine the DARSIRI method of value engineering. How does this approach differ from other
value analysis methods? What specific benefits does it offer?

5. Evaluate the impact of product design on cost, efficiency, and customer satisfaction. How can
companies leverage design principles to create better, more cost-effective products?

Glossary of Key Terms

• Cost Control: The process of monitoring and regulating the expenditure of funds, and ensuring
that costs align with targets and standards. It is a preventive function.

• Cost Reduction: The process of identifying and eliminating unnecessary costs to improve the
profitability of a business; it is a corrective function and looks to improving standards.

• Value Analysis (VA): A systematic approach to improve the value of a product or service by
ensuring it provides the required functions at the lowest cost while maintaining quality and
performance.

• Value Engineering: Similar to value analysis but focused on the design of new products, rather
than existing ones.

• DARSIRI Method: A value engineering method emphasizing reconsideration of cost and

quality through data collection, analysis, brainstorming, investigation, and implementation.

• Variance Analysis: The investigation of the difference between actual and planned behavior,
particularly costs and revenues.

• Ratio Analysis: A tool used to conduct a quantitative analysis of information in a company’s

financial statements, often comparing financial data over time or with competitors.
 • Budgetary Control: A technique used in cost control where a plan, such as a budget, is
established to guide spending.

• Standard Costing: A cost-control technique that involves setting predetermined cost targets
as standards for various aspects of production.

• Waste Management: The activities and actions required to manage waste from its inception
to its final disposal.

• Waste Hierarchy: The order of preference for managing waste; the steps include reduce,
reuse, and recycle.

• Pyrolysis: Thermal degradation of waste in the absence of air, which creates char, pyrolysis oil,
and syngas.

• Use Value: The primary or basic value of a product related to its functionality.

• Esteem Value: The enhanced value of a product associated with its brand or perception, often
referred to as a secondary value.

Cost Control
• Question: What is cost control?

o Answer: Cost control is the process of monitoring and regulating the expenditure of
funds in a business, which means to regulate the operating costs in a firm. It involves
setting targets, ascertaining actual performance, comparing it to the standards,
investigating variances, and taking corrective actions.

• Question: What are the main features of cost control?

o Answer: Cost control is a preventive function that optimizes costs before they are
incurred, and is applicable to items that have standards. It also includes guidelines and
directives on how to do a thing.

• Question: What are the key steps involved in cost control?

o Answer: Cost control involves planning, communication, motivation, appraisal and

reporting, and decision-making.

• Question: What are the main areas of cost control?

o Answer: The main areas include materials, labor, overheads, sales, and energy.

• Question: What are the advantages of cost control?

o Answer: Cost control improves profitability, competitiveness, reduces costs and

prices, and helps achieve greater productivity. It can also help maintain higher sales
and employment if prices are stable.

• Question: What are the disadvantages of cost control?

o Answer: Cost control can reduce flexibility, hinder process improvement, restrict
innovation, and requires skilled personnel to set standards.
 • Question: What factors hamper cost control in India?

o Answer: High costs of raw materials, high foreign commodity prices, power shortages,
delays in licenses, and high tax rates are factors that hamper cost control in India.

• Question: What are some general techniques of cost cutting?

o Answer: Using Skype for calls, social media for marketing, electronic communication,
outsourcing computer maintenance, leasing equipment, and sharing office space are
some techniques.

• Question: What are some techniques of cost control?

o Answer: Budgetary control, standard costing, inventory control, ratio analysis, and
variance analysis are techniques of cost control.

• Question: What is ratio analysis?

o Answer: Ratio analysis is a technique of financial analysis that is used to conduct a

quantitative analysis of information in a company's financial statements. A ratio is a
numerical relationship between two numbers.

• Question: What is variance analysis?

o Answer: Variance analysis is the investigation of the difference between actual and
planned behavior. It is defined as the difference between the expected and actual
amount of costs or revenues.

Cost Reduction
• Question: What is cost reduction?

o Answer: Cost reduction is the process of identifying and eliminating unnecessary costs
to improve the profitability of a business.

• Question: How does cost reduction differ from cost control?

o Answer: Cost reduction is not concerned with setting targets and standards and aims
at improving the standards. Cost reduction is the final result in the cost control process
and is continuous, dynamic, and innovative. It is a corrective function and applicable
to every business activity.

• Question: What are some techniques of cost reduction?

o Answer: Organization and methods, work study, material handling, automation, value
analysis, variety reduction, production control, design, materials control, and quality
control.

Value Analysis
• Question: What is value analysis?

o Answer: Value analysis is an organized and systematic approach to provide the

required function at the lowest cost consistent with performance, quality, and
reliability.
• Question: How does value analysis differ from value engineering?

o Answer: Value analysis pertains to existing products and services, while value
engineering is concerned with the design of new products.

• Question: What is the main objective of value analysis?

o Answer: The main objective is to increase profit by examining high-cost areas and
finding ways to reduce or eliminate unnecessary costs.

• Question: How can value be increased?

o Answer: Value can be increased by retaining the value but reducing the cost, retaining
the cost but increasing the value, or increasing the cost if necessary, but increasing the
value much more than the cost.

• Question: What are the steps in value analysis?

o Answer: Steps include collecting data, determining the function, developing

alternatives, ascertaining costs, evaluating alternatives, and recommending and
implementing the best solution.

• Question: What factors influence product design or redesign from the customer's perspective?

o Answer: Functions, aesthetics, user-friendliness, and esteem associated with

possession influence product design.

• Question: What are some methods of value analysis?

o Answer: Methods include eliminating parts, simplifying parts, substituting materials,

using standard parts, relaxing manufacturing tolerances, using standard manufactured
parts, eliminating unnecessary design features, changing design to suit
manufacturing, outsourcing if cheaper, using pre-finished and pre-fabricated
materials, rationalizing product range, substituting labor cost manufacturing
processes, rationalizing and standardizing low cost purchased parts and eliminating
material waste.

• Question: What are the areas of improvement in value analysis?

o Answer: Areas of improvement include functions, materials, manufacturing, and

specifications.

• Question: What is the DARSIRI method of value engineering?

o Answer: The DARSIRI method is a systematic approach to improve the value of a

product by reconsidering cost and quality. It focuses on quality based on functions,
esteem, and cost.

• Question: What are the steps of the DARSIRI method?

o Answer: Steps include data collection, data analysis, recording of ideas, speculation
and selection, investigation, recommendation, implementation, and periodic review.
Waste Management
• Question: What is waste management?

o Answer: Waste management encompasses all activities required to manage waste

from its inception to its final disposal, including collection, transport, treatment,
disposal, monitoring, and regulation. It also includes the legal framework and
guidance on recycling.

• Question: What are the newer concepts of waste management?

o Answer: Newer concepts emphasize reducing, reusing, and recycling waste in addition
to disposal.

• Question: What are the effects of waste?

o Answer: Waste can have environmental effects such as surface water, ground water,
soil, and air contamination, and economic effects such as affecting municipal
wellbeing and recycling revenue.

• Question: What are the major sources of waste?

o Answer: Major sources of waste include households, industry, agriculture, and

fisheries.

• Question: What are the traditional methods of waste disposal?

o Answer: Landfill is the most traditional method, where waste is dumped in quarries
or pits, compacted and covered with soil. Gases generated can be used for power.

• Question: What are the advantages of landfill?

o Answer: Landfill is a cheap waste disposal method that can be used for different types
of waste and can create jobs. The gases given off can be used to generate power.

• Question: What are the disadvantages of landfill?

o Answer: Landfill sites look ugly, produce dangerous gases that cause pollution and
contribute to global warming, and can cause local streams to become polluted.

• Question: What are other methods of waste disposal?

o Answer: Other methods include compaction, where waste is compressed and

pyrolysis, which is thermal degradation of waste in the absence of air.

• Question: What is biogas?

o Answer: Biogas is a mixture of gases produced by the breakdown of organic matter in

the absence of oxygen. It can be produced from agricultural waste, manure, municipal
waste, plant material, sewage, green waste, or food waste.

• Question: What are the problems with plastic waste?

o Answer: Plastic waste is a major problem because it is non-biodegradable and burning

it causes environmental pollution.

• Question: How can plastic waste be used?

 o Answer: Plastic waste can be used in bituminous mixes for road construction, which
enhances the property of the mix.

• Question: What are the advantages of plastic roads?

o Answer: Plastic roads have no cracking or potholes, have resistance to water, reduce
maintenance costs, and reduce stress on bitumen.

• Question: What are the disadvantages of plastic roads?

o Answer: During the cleaning process, toxins present in the plastic waste could leach.
During road laying, chlorine in the plastic can release noxious HCL gas, and it's opined
that the first rain will trigger leaching.

Important Topics

• The distinction between cost control and cost reduction.

• The processes and techniques for cost control and cost reduction.

• The concepts of value analysis and its differences from value engineering.

• The DARSIRI method of value engineering.

• Methods of waste disposal and the problems associated with plastic waste.

• The concept of using waste plastic in road construction.

These questions and answers provide a comprehensive overview of the main topics covered in the
sources and should be helpful for study.

Essay Question 1: Compare and contrast cost control and cost reduction, highlighting their
importance in a business.

Answer: Cost control and cost reduction are both crucial for a business's financial health, but they
differ significantly in their approach and objectives. Cost control is a preventive function that focuses
on monitoring and regulating expenditure by setting targets and standards. It aims to optimize costs
before they are incurred. This involves establishing budgets, tracking performance, and taking
corrective actions when variances occur. Cost control is applicable to items that have standards, and it
provides guidelines on how tasks should be done. In essence, it's about adhering to a plan to keep
costs within acceptable limits. Cost reduction, on the other hand, is a corrective function that focuses
on identifying and eliminating unnecessary costs. It is not concerned with setting targets, but rather
with improving existing standards and aiming for greater efficiency. Cost reduction is continuous,
dynamic, and innovative, always seeking alternatives to lower expenses. It is applied to every aspect
of the business and adds analysis to action at all management levels. While cost control seeks to
maintain costs, cost reduction strives to actively lower them. Both are essential, with cost control
preventing unnecessary spending and cost reduction actively pursuing greater efficiency, ultimately
improving a company’s profitability and competitiveness. Cost control ensures adherence to set
standards, while cost reduction challenges those standards to achieve even better results.
Essay Question 2: Discuss the concept of value analysis, its objectives, and the methods used to
achieve its goals.

Answer: Value analysis (VA) is a systematic approach aimed at providing required functions at the
lowest possible cost, while maintaining specific performance, quality, and reliability. Unlike value
engineering, which focuses on new products, VA examines existing products and services to identify
areas of high cost. The primary objective of value analysis is to increase profit by critically examining
costs. This involves a cross-functional team effort and a detailed analysis of product design, materials,
manufacturing processes, and specifications. The value can be enhanced by either reducing cost while
retaining value or increasing value more than any cost increase. Methods of value analysis include
eliminating unnecessary parts, simplifying designs, using substitute materials, standardizing parts,
and relaxing manufacturing tolerances. Other methods include outsourcing, using pre-finished
materials, and substituting labor-intensive processes to minimize cost. VA considers customer needs,
organizational resource use, and intrinsic material/labor costs. By thoroughly assessing all these
aspects, value analysis helps companies achieve cost reductions while maintaining or even improving
product value, ensuring customer satisfaction, return on investment, and future expansion
opportunities. Essentially, VA is about making informed decisions to optimize the balance between
product function and cost.

Essay Question 3: Explain the significance of waste management, including different disposal
methods and the potential use of plastic waste in road construction.

Answer: Waste management is a critical process that encompasses all activities from the inception of
waste to its final disposal. This includes collection, transportation, treatment, and disposal, along with
monitoring and regulation. It also includes the legal and regulatory frameworks guiding recycling and
other waste-related activities. Modern waste management emphasizes reducing, reusing, and
recycling waste, in addition to disposal. Effective waste management is vital due to its impact on the
environment and economy. Improper waste disposal can lead to surface and groundwater
contamination, soil contamination, and air pollution. Traditional methods of waste disposal include
landfilling, where waste is dumped and compacted. While a cheap option, it poses significant
environmental risks, such as the emission of dangerous gases and pollution of local streams. Other
methods include compaction and pyrolysis, which is thermal degradation of waste in the absence of
air. Plastic waste is a major problem due to its non-biodegradable nature and the pollution caused by
burning it. However, recent studies indicate that plastic waste can be used in bituminous mixes for
road construction, improving the mix properties and providing a useful disposal solution. While this
method has advantages like no cracking or potholes and reduced costs, there are disadvantages such
as the potential for toxic leaching and the release of noxious gases. Overall, effective waste
management is essential for safeguarding the environment, ensuring public health, and promoting
sustainability.