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. Ideally, these costs should be stripped out of an organization’s responsibility reporting, so that the recipients of these reports only see revenue and expense items over which they have direct control.

Example of Uncontrollable Costs

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.