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CMA Foundation · Fundamentals of Financial and Cost Accounting · Classification of Costs (CAS 1)

Which statement about controllable and non-controllable costs is correct?

A cost that a supervisor cannot influence may still be controllable by senior management, because controllability depends on the level of authority and the time period. It is not determined by cost behaviour or by whether the cost is direct or indirect.

  1. AA cost non-controllable at a lower level cannot be controllable at any higher level
  2. BA cost non-controllable for a supervisor may be controllable by the senior managementCorrect
  3. CFixed costs are always non-controllable for every manager
  4. DControllability depends only on whether a cost is direct or indirect

Explanation

Controllability depends on the level of authority and time horizon. A cost a supervisor cannot change, such as rent under a lease, may be decided by senior management. Fixed costs are not always non-controllable, and direct/indirect is a separate classification.

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