Question

If a cost is considered controllable, it indicates that all aspects of the cost are under the control of the manager of the responsibility center to which that cost is assigned. Answer: TRUE or FALSE.

Answer 1

The statement is TRUE as controllable costs are those costs that a manager can influence within a specific time frame, and they can include both fixed and variable costs related to the manager's responsibility center.

Step-by-step explanation:

The statement that if a cost is considered controllable, it indicates that all aspects of the cost are under the control of the manager of the responsibility center to which that cost is assigned, is TRUE. Controllable costs are those that can be influenced by the decisions of a manager within a specific time frame. It is crucial to distinguish between fixed costs and variable costs in this context. Fixed costs, such as the rent on a factory or a retail space, do not vary with the level of production and are mandatory for the business to operate. These costs are typically viewed as sunk costs in the short run, which means they should not affect future economic decision-making. On the other hand, variable costs are directly associated with the production process and can be adjusted more readily by management's operational decisions.

Answer 2

The statement that a cost is considered controllable if all aspects of it are under the manager's control is TRUE. Fixed costs are not typically controllable in the short run, while variable costs usually are, and controllable costs imply the manager's authority over them.

Step-by-step explanation:

If a cost is considered controllable, it indicates that all aspects of the cost are under the control of the manager of the responsibility center to which that cost is assigned. The answer to the student's question is TRUE.

To further clarify, costs can be categorized as either fixed or variable. Fixed costs, such as rent on a factory, are expenses that do not change in the short run regardless of the level of production. These are often considered sunk costs and are not controllable in the short run. On the other hand, variable costs vary with production and are often controllable by the manager. For example, a manager can influence material costs or direct labor hours, making these costs controllable.

A controllable cost in the context of a responsibility center implies that a manager has the authority to incur the cost and also the power to influence its amount. If a manager doesn't have the authority to change a cost, then it is considered uncontrollable for that manager.