This cost concept is designed to fix responsibility of cost control for various levels of management. Therefore, it is always associated with a designated level in organizational hierarchy.
Controllability of a cost means the degree of influence that a specific manager can exert over the cost item. As we move upwards in organizational hierarchy more and more costs become controllable, and for the chief executive there is no uncontrollable cost. Whereas, for managers at lower levels there are fewer controllable costs.
Behaviour of Costs
A controllable cost for a specified manager is one over which he has the influence as the power to authorize it is vested in him. An uncontrollable cost is one which is out of the sphere of influence of a specified manager by virtue of limited authority given to him. For example, for a production supervisor costs of direct materials and direct labour used in his department are controllable costs but cost of depreciation of plant is uncontrollable for him. For production manager, who authorizes purchase of plant and equipments, depreciation of plant is a controllable cost.
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