Final answer:
Controllable costs are those that can be altered by management decisions, as opposed to fixed costs which remain constant regardless of production levels. Managers can adjust controllable costs based on company needs, differing from fixed costs like rent which are unaffected by production.
Step-by-step explanation:
Costs that can be influenced by a manager's decisions and actions are called controllable costs. These cost elements differ from indirect costs, which are not directly tied to a specific cost object, and direct costs, which are related to the production of a specific good or service. Unlike fixed costs, such as rent, which do not change regardless of production levels, controllable costs can be adjusted or eliminated depending on managerial decisions. For instance, labor or raw material costs can often be controlled by a manager.
Fixed costs, often referred to as "overhead," are consistent regardless of the production quantity. When one divides fixed cost by the quantity of output, the result is the average fixed cost. The average fixed cost curve typically slopes downwards as production increases, illustrating the concept of "spreading the overhead," which means attributing a decreasing proportion of fixed costs to each unit as production volume grows.