Companies are incurring extra costs for providing work from home facilities to employees during the current pandemic. Identify whether these are controllable or non controllable costs.

INTRODUCTION TO COST ACCOUNTING

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Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]

A	Controllable
B	Non controllable
C	We need further information to arrive at a decision as whether a cost is controllable or non controllable depends on the level of management authority .

Explanation:

Detailed explanation-1: -Controllable costs are considered so when the decision of taking on the cost is made by one individual. Common examples of controllable costs are office supplies, advertising expenses, employee bonuses, and charitable donations. Controllable costs are categorized as short-term costs as they can be adjusted quickly.

Detailed explanation-2: -Cost behavior analysis refers to management’s attempt to understand how operating costs change in relation to a change in an organization’s level of activity. These costs may include direct materials, direct labor, and overhead costs that are incurred from developing a product.

Detailed explanation-3: -Managerial accounting involves the presentation of financial information for internal purposes to be used by management in making key business decisions.

Detailed explanation-4: -It may establish the practice and procedure of making cost records. The need for installing a costing system should be justified by a cost-benefit analysis. The benefits expected from the costing system should more than compensate the expenses of installing and operating the system.

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