Definition: Non-controllable costs, sometimes called uncontrollable costs, are expenses that a manager does not have power or authority to influence.
What Does Non-controllable Cost Mean?
Based on the company’s hierarchy, some managers might have costs that are required to be paid out of their department, but they have no control over how much these costs are or when they need to be paid. Management or officers above a department might dictate these costs and hand them down the pecking order.
A good example of non-controllable costs is large equipment purchases. Take a machine shop for example. The factory floor foreman is in charge of not only the machinists and assembly line workers in his department, he is also in charge of productions levels and related costs incurred by the department.
Since the factory floor requires large machinery to operate, on occasion the company has to purchase new machinery or update existing equipment. Most of the time both of these propositions can be quite costly.
Unfortunately, the decision to purchase or update a machine is not made by the factory floor foreman. The company upper management or officers made all the capital acquisition decisions. This means that the foreman has no influence over how much will be spent and when.
The purchase of a new piece of machinery would be a non-controllable cost to the foreman. His department will most likely have to pay for the new equipment, but he will not be able to exercise much influence in the matter. Obviously, it is more effective if upper management consults with the foreman on capital purchases, but this doesn’t always happen.