Controllable and non controllable costs, Cost Accounting

Controllable and Non Controllable Costs

Controllable costs can be influenced on the level of authority at that they are being analyzed when non-controllable costs cannot.

A. Controllable cost - Refers to the cost that can be influenced via the actions of a person in whom authority for that control is vested, as like an example control of labour cost will be influenced via the method of remuneration and the degree at management control that is exercised via a specific managers.

B. Non controllable cost - is cost that cannot be influenced via a person in whom authority for that control is vested as like an example: if the trade union demands a rise in wages the increment is non controllable cost. Likewise, the depreciation of a building is a non-controllable cost to a manager like he does not contain authority over depreciation!

In decision making, merely controllable costs are considered since they can be changed via the decision maker. There is little or nothing such the decision maker can do about the non-controllable costs hence they are irrelevant in decision making. But, the facilities given through the nun-controllable costs should be efficiently utilized.

Posted Date: 2/5/2013 3:09:52 AM | Location : United States

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