Controllable and uncontrollable cost

Controllable cost

Controllable cost is the discretionary expense incurred by a business. As the name suggests, this expense can be controlled by avoiding additional features and related luxuries. For instance, the airline can avoid entertainment expenses by cutting refreshments for the passengers.

Additional discretionary expenses include marketing, training, bonuses, refreshments, utilities, materials, etc. The manager’s behaviour and thoughts have a strong impact if the business is expected to incur controllable costs.

Following are some of the characteristics related to controllable cost.

• This cost can be changed in the short term. It’s the discretion of senior management to approve this expense.
•  It does not take much time to control this cost.

Uncontrollable cost

On the other hand, uncontrollable expenses are essential expenses that can not be avoided. For instance, administrative expenses are considered uncontrollable, and departments have to bear them irrespective of their intention or will. Depreciation, rental costs, insurance, licenses, mortgages, and other expenses are also considered essential and not controllable.

Following are some of the characteristics related to uncontrollable costs.

• It’s usually a contractual or fundamental cost that can’t be avoided.
• Usually incurred for the long-term

Conclusion

Controllable cost depends on managerial discretion. It’s a discretionary business expense which can be avoided. Examples include marketing, training, bonuses, refreshments etc.

Uncontrollable costs are fundamental and essential business costs that are unavoidable. Examples include office rent, depreciation, licenses, and insurance etc.