Controllability principle
Controllability principle holds that managers should be evaluated only on costs and revenues they can meaningfully influence, keeping performance reports free from outcomes driven by chance or others' decisions.
Also known ascontrollability
FrameworkResponsibility accounting
See it move
A two-column comparison separates controllable items — labour scheduling, overtime hours, and material usage — from non-controllable items set at headquarters, namely the plant lease, the energy tariff, and allocated head-office charges. The controllability principle holds that managers should be judged and rewarded only on costs within their own authority; non-controllable items may appear on the report for awareness but must be excluded from the bonus calculation.
Check yourself
A production manager at Altea Ceramics SA controls labour scheduling and raw-material usage. The plant's lease of €12,000 per month was negotiated by head office. Her performance report shows both the direct labour variance and the full lease charge. Under the controllability principle, which costs should appear in her evaluation?