What Are Controllable Costs?

Of course, the next question becomes: what costs are controllable? What expenses can a company truly reduce at will, and what costs are fixed?

The truth is that most costs can be controlled. This doesn’t mean that these costs can be reduced to zero – it just means that managers have a choice in how great an expense they will incur. Some broad examples of controllable costs include:

• Raw materials
• Supplies
• Maintenance expenses
• Labor costs, including employee training costs, benefits, and bonuses
• Advertising expenses
• Corporate social donations

Clearly, some of these costs are more controllable than others. Most companies cannot reduce these expenses indefinitely – you must have materials, you must pay labor costs. 

Many of these costs are directly tied to other costs in the market. Material costs are determined by suppliers. Employees can leave for higher paying jobs. Most companies are not so well known that they can afford to eliminate their advertising and marketing.

Some of these costs are what you might call “partly controllable”. Employees may dictate the cost of human labor, but labor costs can be reduced with technology. Advertising expenses can be directed to more efficient channels. Donations can be reduced or eliminated in some instances.