What is a Non-Controllable Cost?

A non-controllable cost is an expense that is not within the sphere of control of a manager. The cost may be controllable at a higher level of the organization, but it is not controllable from the perspective of the person in question. For example, a manager cannot alter his own salary. Or, a department manager has no control over the rent charge that is allocated to his department for office space used. The proportion of non-controllable costs in a manager's budget dictates the extent to which he can influence the expense level of his department.

This cost is a particular concern when senior management wants to allocate corporate overhead to the various functional areas of a business. The managers of these areas will likely push back, on the grounds that they have no control over the costs being foisted upon them, and which make their overall results look worse.

Example of Non-Controllable Costs

Henry manages a subsidiary that runs a cluster of retail stores. The costs incurred by these stores are controllable costs. However, the income statement for which Henry is responsible also contains a charge for the corporate overhead of the parent company, as well as a charge for legal services provided, and an allocation of the parent company CEO’s salary. Henry cannot influence any of these three expenses, and so they should be considered non-controllable costs.

Related AccountingTools Course

Cost Accounting Fundamentals

Non-Controllable Cost FAQs

Are fixed costs always noncontrollable costs?

No. Fixed costs are not always noncontrollable costs. Some fixed costs cannot be changed in the short term by a specific manager, but may be controllable over a longer period or by a higher-level manager. For example, rent may be fixed now, while staffing levels or service contracts may later be changed.

Cost Accounting Basics

Discretionary Costs

The Difference Between Cost and Expense

The Difference Between Fixed and Variable Costs

The Difference Between Implicit and Explicit Costs

The Difference Between Marginal Costing and Absorption Costing