Q15RQ - Horngren'S Financial And Managerial Accounting

Question

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

Step-by-Step Solution

Answer

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 1: 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.

Step 2: 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.