CLASSIFICATION OF COSTS (BY CONTROLLABILITY)

CLASSIFICATION OF COSTS

 By Controllability
Costs here may be classified into controllable and uncontrollable costs.

(a) Controllable Costs: - Cost that can be controlled, typically by a cost, profit or investment centre manager is called controllable cost. Controllable costs incurred in a particular responsibility centre can be influenced by the action of the executive heading that responsibility centre. For example,direct costs comprising direct labour, direct material, direct expenses and some of the overheads are generally controllable by the shop level management.

(b) Uncontrollable Costs - Costs which cannot be influenced by the action of a specified member of an undertaking are known as uncontrollable costs. For example, expenditure incurred by, say, the tool room is controllable by the foreman in-charge of that section but the share of the tool-room expenditure which is apportioned to a machine shop is not to be controlled by the machine shop foreman.