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Wednesday, June 9, 2010

Classification Of Overheads Based On Control

Control of cost is one of the prime concerns of management. There are some expenses which can easily be controlled by the management while some other cannot be. From the point of view of cost control, overheads can be divided into two types:

1. Controllable Overheads

Controllable overheads are the indirect expenses which the management of a manufacturing concern can keep under its control, as they are influenced by its decisions. Therefore those overheads which vary due to the management decisions are called controllable overheads. The examples of controllable overheads are indirect materials, power expenses and lighting expenses.

2. Uncontrollable Overheads

Those indirect expenses which are beyond the control of the management are known as uncontrollable overheads. The management cannot influence such expenses by its decisions and therefore, they are uncontrollable. The examples of uncontrollable overheads are fixed overheads like factory rent, office salaries, depreciation, and legal expenses.