In the short term, which of the following costs would be classified as uncontrollable
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Revenue sources and expenses are critical components of company profitability. Two expense types are controllable costs and non-controllable costs. Controllable costs are those over which the company has full authority. Such expenses include marketing budgets and labor costs. By contrast, non-controllable costs are those that a company cannot change, such as rent and insurance. It is important for management to know the differences between these two cost types. We have listed three reasons for this importance below. Show 1. Efficient management. By focusing more on controllable costs, management can proactively – and more quickly – react to the information that financial statements disclose. 2. Effective cost monitoring. Although a financial statement does not present raw numbers, it is the organization’s financial scorecard. A financial statement that separates controllable costs from non-controllable costs gives management a clearer picture of the entity’s financial health. Such a statement also allows management to compare monthly or annual trends and quickly pinpoint any unusual patterns. 3. Incentive packages. In some industries, management is paid according to a profitability split. Therefore, keeping a manager accountable for controllable costs – and unpunished for what s/he cannot control – makes sense. If a company’s financial statements clearly define expenses and their impact on profitability, then team members can more easily understand the incentive packages. CRI Can Help You Determine Your Controllable and Non-Controllable CostsThere are so many ways to evaluate your organization’s finances. Controllable costs and non-controllable costs are the two most integral pieces that are best for you to manage. Contact CRI to see how they can offer assistance in preparing your financial statements and/or creating a cost management plan. Classify each of the following costs as fixed or variable: b. c. d. e. f. g. h. of Panera Bread in St. Louis, Missouri i. at Klaben Ford Lincoln, a car dealership in Kent, Ohio j. k. l. m. n. o. Recommended textbook solutionsIntermediate Accounting14th EditionDonald E. Kieso, Jerry J. Weygandt, Terry D. Warfield 1,471 solutions
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Financial Accounting11th EditionCharles T. Horngren, C William Thomas, Walter T. Harrison Jr., Wendy M Tietz 1,039 solutions An uncontrollable cost is an expense over which a person has no direct control. The concept most commonly applies to the manager of a department, whose departmental expenses include several line items which he has no ability to alter. Uncontrollable costs can be a concern when a manager is being judged based on departmental expenses. For example, there is a scheduled increase in the rent payment to the landlord, and a portion of this expense is allocated to a department that occupies a portion of the rented property. The manager of that department appears to be managing his expenses poorly because of the rent expense increase, even though he was not responsible for the rent agreement. Examples of Uncontrollable CostsExamples of uncontrollable costs are rent expense, the corporation overhead allocation, the administrative overhead allocation, and depreciation expense. What are uncontrollable costs?An uncontrollable cost is an expense over which a person has no direct control. The concept most commonly applies to the manager of a department, whose departmental expenses include several line items which he has no ability to alter.
What is controllable and uncontrollable cost?Controllable costs are those over which the company has full authority. Such expenses include marketing budgets and labor costs. By contrast, non-controllable costs are those that a company cannot change, such as rent and insurance. It is important for management to know the differences between these two cost types.
What is an example of a controllable cost?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.
What are the 4 types of costs?Costs are broadly classified into four types: fixed cost, variable cost, direct cost, and indirect cost.
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