Question

What is your understanding of uncontrollable and controllable cost what facyirs are taken into consideration when distinguishing the two cost?

Answer 1

Controllable costs are those costs which can be controlled over a period of time or at a point of time. They can be eliminated if a particular activity is not continued.

Uncontrollable costs are the costs which are not controlled or the authority to control is out of the hands of the decision makers. Most of the fixed costs are uncontrollable in nature.

The factors which are taken to consideration when distinguishing the uncontrollable and controllable costs are:

1. Nature of the cost

2. Time Period

3. Types of costs eg., variable cost, step fixed cost, fixed cost etc.

4. Decision making authority