Distinguish between controllable and uncontrollable costs. Then, explain the following statement: 'The distinction between controllable and uncontrollable costs is used in evaluati... Distinguish between controllable and uncontrollable costs. Then, explain the following statement: 'The distinction between controllable and uncontrollable costs is used in evaluating the performance of a manager'.
Understand the Problem
The question asks for a distinction between controllable and uncontrollable costs, and then requires an explanation of how this distinction is relevant in evaluating a manager's performance.
Answer
Controllable costs are manager-influenced; uncontrollable are not. Only controllable costs assess managerial performance.
Controllable costs are those a manager can influence or adjust, such as labor and materials. Uncontrollable costs cannot be directly managed by individuals, like rent or insurance. Evaluating a manager focuses on controllable costs, as these directly reflect managerial effectiveness, whereas uncontrollable costs are excluded.
Answer for screen readers
Controllable costs are those a manager can influence or adjust, such as labor and materials. Uncontrollable costs cannot be directly managed by individuals, like rent or insurance. Evaluating a manager focuses on controllable costs, as these directly reflect managerial effectiveness, whereas uncontrollable costs are excluded.
More Information
Controllable costs directly relate to a manager's decisions and actions. This makes them a key focus for performance evaluations to ensure accurate assessments. Ignoring uncontrollable costs prevents unfair penalization of managers for expenses outside their responsibility.
Tips
A common mistake is assuming all costs can be managed by managers. It’s crucial to differentiate between costs that can and cannot be influenced directly.
Sources
- Controllable and Uncontrollable Costs - AccountingVerse - accountingverse.com
- Difference Between Controllable and Uncontrollable Costs - Finance Strategists - financestrategists.com
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