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Management Accounting · Budgetary control and reporting

Controllable and Uncontrollable Costs for ACCA MA

Updated 11 October 2026 · Fact-checked

A controllable cost is one a specific manager can influence through their own decisions within a given time period. An uncontrollable cost is set by someone else or by factors outside that manager's authority. In responsibility reporting, judge managers only on controllable items, so the report is fair and motivating.

Understand Controllable and Uncontrollable Costs

Every cost is controllable or uncontrollable relative to a particular manager and a particular time period. The same cost can be controllable for one person and uncontrollable for another. That is the first idea to hold on to.

Suppose a factory manager decides how many machine operators to use and how much overtime to work. Overtime cost is controllable by that manager. But the head office may charge the factory a share of central administration costs. The factory manager cannot change that charge, so it is uncontrollable for them. It may be controllable by the head office manager who incurs it.

Time matters too. In the long run, almost every cost is controllable by someone, because senior managers can close a plant or renegotiate a lease. In the short run, many costs are fixed by earlier decisions. A budget period is usually short, so a rent agreed last year is uncontrollable for this year's branch manager.

This links to responsibility accounting. The business is split into responsibility centres (cost, profit and investment centres). Each manager gets a report showing the items they answer for. If you include costs they cannot influence, the report blames them for things outside their power. This lowers motivation and hides the real causes of poor performance.

The same idea applies to variances. A controllable variance arises from decisions inside the manager's authority, such as wasting material. An uncontrollable variance arises from external events, such as a market-wide price rise from suppliers. Good reports separate the two, so the right person is asked to explain the right figure.

Key formulas to remember

Controllability test
Controllable cost = a cost the named manager can influence in the stated period
Always ask: which manager, and which time period?
Controllable profit of a centre
Controllable profit = Revenue − Controllable costs
Excludes allocated head office costs and other items the manager cannot influence.
Reporting rule
Manager's performance report = Controllable items only
Uncontrollable items may be shown separately for information, below the controllable result.

How to solve Controllable and Uncontrollable Costs questions

Use this method for any question asking you to classify costs, build a responsibility report or judge a manager's performance.

  1. 1Identify the manager or responsibility centre the question is about, and the time period.
  2. 2List each cost or variance in the question.
  3. 3For each item, ask: can this manager influence the amount through their own decisions in this period? If yes, it is controllable.
  4. 4Check who decides the item: head office allocations, group-wide agreements and external prices are usually outside the manager's control.
  5. 5Separate the items into two groups: controllable and uncontrollable.
  6. 6Calculate the figure asked for using only the controllable group, unless the question says otherwise.
  7. 7State briefly why the excluded items were excluded, and who might be responsible for them.

Quickest way: Who decides it?

When to use it: Use this for multiple choice and multiple response questions where you must pick which items are controllable.

  1. Read which manager the question names.
  2. For each option, ask 'Who decides this amount?'
  3. If the named manager decides it, keep it. If head office, an outside party or an earlier decision decides it, reject it.
  4. Watch for words like 'allocated', 'apportioned', 'set by head office' and 'group-wide'. These signal uncontrollable.
  5. For number entry, add up only the kept items and re-read the question to confirm what is asked.

Common mistakes in Controllable and Uncontrollable Costs

  • Treating all fixed costs as uncontrollable.

    Students link 'fixed' with 'cannot change'.

    Fix: Fixed costs are uncontrollable only if the manager has no say. A manager who decides on staffing or advertising controls those fixed costs.

  • Treating all variable costs as controllable.

    Variable costs move with activity, so they look manageable.

    Fix: Check who sets the price or rate. A supplier price rise in the market is outside the manager's control, even though the cost is variable.

  • Including apportioned head office costs in a manager's performance figure.

    Students want the report to add up to total profit.

    Fix: Show controllable profit first. Show allocated costs below it, clearly labelled as uncontrollable by the manager.

  • Ignoring the time period.

    Students think 'in the long run everything is controllable' and stop there.

    Fix: Judge control within the budget period. A contract signed earlier is uncontrollable now.

  • Saying a cost is uncontrollable full stop.

    Students forget control depends on the manager.

    Fix: Always say 'uncontrollable by this manager' and, if useful, name who can control it.

Worked examples

Example 1

A branch manager of a retail chain has these monthly figures: sales $240,000; cost of goods sold $144,000; staff wages set by the branch manager $30,000; branch rent fixed by head office $20,000; head office cost allocation $12,000; local advertising chosen by the branch manager $6,000. Calculate the branch's controllable profit.

Show the solution
  1. Identify controllable items: cost of goods sold, staff wages and local advertising are within the branch manager's decisions.
  2. Rent fixed by head office and the head office allocation are not decided by the manager, so they are uncontrollable.
  3. Controllable costs = 144,000 + 30,000 + 6,000 = $180,000.
  4. Controllable profit = 240,000 − 180,000 = $60,000.

Answer: Controllable profit is $60,000. The rent ($20,000) and head office allocation ($12,000) are excluded.

Example 2

A production manager's material price variance is $9,000 adverse. Of this, $6,500 arose because the supplier raised prices across the whole market. The rest arose because the manager bought a more expensive grade without approval. State the controllable and uncontrollable parts and how the manager should be assessed.

Show the solution
  1. The market-wide price rise is outside the manager's influence, so it is uncontrollable: $6,500.
  2. The rest is 9,000 − 6,500 = $2,500.
  3. Buying a dearer grade without approval was the manager's own decision, so $2,500 is controllable.
  4. Assess the manager on the $2,500 adverse controllable variance. Report the $6,500 separately for information.

Answer: Controllable adverse variance $2,500; uncontrollable adverse variance $6,500. Hold the manager accountable only for the $2,500.

Exam tips

  • Always tie your answer to the named manager. The same cost can be controllable for one manager and not for another.
  • Allocated or apportioned head office costs are the classic uncontrollable item. Look for them first.
  • In number entry questions, re-read whether you must include or exclude uncontrollable items before you add up.
  • In multiple response questions, select exactly the stated number of options. Do not pick an item just because it is fixed or variable.
  • Link your reasoning to motivation: reports should be fair, so managers are judged only on what they can influence.

Practice questions from Budgetary control and reporting

Controllable and Uncontrollable Costs in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Controllable and Uncontrollable Costs: frequently asked questions

What is the difference between controllable and uncontrollable costs?

A controllable cost can be influenced by a specific manager within a given period. An uncontrollable cost is decided by someone else or by outside factors. Which category a cost falls into depends on the manager you are assessing.

Are fixed costs always uncontrollable?

No. A fixed cost is uncontrollable only if the manager cannot influence it in the period. A manager who decides on staffing levels or advertising spend controls those fixed costs.

Why should reports only include controllable items?

Judging managers on costs they cannot influence is unfair and can reduce motivation. Showing controllable items separately also helps management see who should act to improve results.

What are controllable and uncontrollable variances?

A controllable variance comes from decisions inside the manager's authority, such as excess waste. An uncontrollable variance comes from external events, such as a general market price change. Reports should separate them so the right person explains each.