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Mixed costs can be separated into their fixed and variable elements by using records of costs from previous periods - Leaving Cert Accounting - Question b - 2012
Question b
Mixed costs can be separated into their fixed and variable elements by using records of costs from previous periods. Edant ple manufacturers a single component for t... show full transcript
Worked Solution & Example Answer:Mixed costs can be separated into their fixed and variable elements by using records of costs from previous periods - Leaving Cert Accounting - Question b - 2012
Step 1
Explain, with examples, 'controllable' and 'uncontrollable' costs.
Answer
Controllable costs are those that can be influenced by a manager's decisions. For instance, if a manager decides to cut down on unnecessary expenses, such as marketing, these costs can be controlled. This essentially means that the manager is responsible for the outcomes of these costs and their budgeting.
Examples:
- Direct materials and labor costs that can be adjusted based on production levels.
Uncontrollable costs are costs that managers cannot change or influence. These might arise from external factors or as fixed expenses that must be incurred regardless of performance.
Examples:
- Overhead costs like property taxes or utility costs may be uncontrollable as they are fixed or not directly influenced by the operational activities.