Chapter 19, Problem 9DQ

Summary Introduction

To determine: The difference between cost-reduction and cost-avoidance. Explain the reason why cost avoidance is described as “soft”, “funny money” and “easy to manipulate”? Mention the situation when purchasing can be regarded for cost reduction or cost avoidance?

Introduction: Performance improvement along with cost reduction is one of the major areas companies are giving high focus as it enables them to gain competitive advantage. But unfortunately only handful of companies have found a limited success in achieving the goal.