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CA Intermediate · Cost and Management Accounting · Introduction to Cost and Management Accounting

Which of the following is the best example of a cost that is classified as a 'controllable cost' for a departmental manager at a Coimbatore textile mill?

Overtime wages in the manager's own department are controllable because the manager can approve or reduce them. Building depreciation, apportioned MD salary and corporate advertising are decided by higher authority and merely allocated, so they are uncontrollable at the departmental level.

  1. ADepreciation on the factory building allocated by head office
  2. BOvertime wages in the manager's own weaving department, which the manager can approve or curtailCorrect
  3. CSalary of the company's Managing Director apportioned to the department
  4. DCorporate advertising expenses charged to all departments

Explanation

A controllable cost is one whose amount can be influenced by the manager at a given level of authority. Overtime in the manager's own department is within the manager's authority. The other items are allocated or decided at higher levels, so they are uncontrollable for that manager.

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