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Chapter 24: Q15RQ (page 1355)

Explain the difference between a controllable and a non-controllable cost.

Short Answer

Expert verified

A controllable cost is one that the administration can influence with their choices. A non-controllable cost is one that the administration cannot impact.

Step by step solution

01

Meaning of Controllable Cost

The costs that can be changed in response to a need or business option are called controllable costs. These costs pertain exclusively to a specific item, division or function. Some examples are direct labour, direct supply, contribution, preparation cost, bonus, membership, legitimate expenses and official costs.

02

Difference between a controllable and a non-controllable cost

Characteristics

Controllable

Non-controllable

Definition

Alludes to a cost which will be changed depending on a necessity or business choice.

Alludes to a cost that cannot be changed in response to a particular business need or choice.

Time span

short-term changes are possible

Long-term cost changes are possible.

Example

Direct labour, direct supplies, contributions, and other expenses are controlled costs.

Depreciation, insurance, and administrative overhead are examples of unavoidable expenditures.

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