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The reduction of overheads as an effective cost-control measure requires a careful review of the cost base of an organization. Critical to the success of the cost reduction review are the elimination of specific activities or the use of more cost-efficient techniques in the implementation of these activities within the budget process. An examination of the budget process, particularly at the planning stage, may show any of a number of inadequacies in the process, such as in strategic plan linkages, challenging the initial cost base, allocations, bureaucracy, gamesmanship, and budget detail. Activity analysis is suggested as an approach to effectively reducing overheads by veering away from traditional accounting approaches and using detailed analysis on overhead.

Budgeting techniques are discussed as methods for controlling fixed and variable costs, and direct and indirect expenses. The classification of expenses as either controllable or uncontrollable is also explained. Methods for determining each operating unit's profit contribution are identified and analyzed.