cost

Controllable costs are those that the manager of the division controls. So, for example, if the manager is allowed to fix the wages of his/her employees then this is a controllable costs.

Non-controllable costs are those that the manager of the division has no control over. So, if head office charges the division with a share of the head office costs, the manager has no control over the amount – it is head office who decides what the costs are, not the manager. Another example (for a profit centre) is depreciation. In a profit centre the manager cannot decide on the purchase of non-current assets – it is head office who decides. Therefore the manager has no control over the purchase and therefore no control over the amount of depreciation.

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