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ACCA Applied Knowledge · Management Accounting · Nature and purpose of budgeting

Which of the following costs in a department's budget report should be treated as controllable by the department manager when judging performance?

Overtime the manager approved is controllable, because the manager's own decision created the cost. Apportioned head office charges, depreciation decided by the board and rent set centrally are outside the manager's influence, so they should not be used to judge that manager's performance.

  1. AApportioned head office administration charge
  2. BDepreciation on equipment decided by the board
  3. COvertime paid after the manager approved extra shiftsCorrect
  4. DRent of the factory building set by head office

Explanation

A controllable cost is one the manager can influence through their own decisions. Overtime approved by the manager is controllable. Head office charges, board-determined depreciation and rent set by head office are outside the manager's control, so including them would distort performance assessment.

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