CIMA P2 Syllabus C. Managing Performance Of Organisational Units - Principle of Controllability - Notes 4 / 10
Responsibility accounting
is a system that segregates revenue and costs into areas of personal responsibility
Why?
To monitor and assess the performance of each part of an organisation.
Controllability
The principle of controllability is that managers of responsibility centres should only be held accountable for costs over which they have some influence.
They may become demotivated if they are made responsible for non-controllable costs.
Budgetary control is based around a system of budget centres.
Each budget centre will have its own budget and a manager will be responsible for managing the budget centre and ensuring that the budget is met.
Controllable costs
Managers CAN control them.
Most variable costs within a department are thought to be controllable in the short term because managers can influence the efficiency with which resources are used.
Non-controllable costs
Managers CAN'T control them.
Some costs are non-controllable, such as increases in expenditure items due to inflation, overheads allocated from other areas of the organisation, etc.