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ACCA Applied Skills · Performance Management · Divisional performance and transfer pricing

Which of the following costs is most appropriately treated as non-controllable by a divisional manager when assessing that manager's performance?

A head office management charge allocated by a fixed formula is non-controllable by the divisional manager, because central management sets it. Wages, advertising and maintenance are decided within the division, so the manager can influence them and should be held accountable.

  1. AWages of divisional production staff, whose headcount the manager decides
  2. BHead office management charge allocated to the division by a fixed formulaCorrect
  3. CDivisional advertising spend set by the divisional manager
  4. DRepairs and maintenance of divisional machinery, scheduled by the manager

Explanation

A head office charge allocated by formula is decided by central management, so the divisional manager cannot influence it. The other costs are decided by the divisional manager and are therefore controllable.

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