Which of the following is considered a controllable cost?

• A. Prepaid fuel
• B. Uninsured losses
• C. Maintenance fees
• D. Employee salaries

Answer: (B)

Uninsured losses are categorized as controllable costs because they directly relate to management decisions and risk management practices within an organization. These costs arise from incidents that could potentially be prevented or mitigated through effective policies and operational controls.

Effective management can choose to implement various strategies to reduce the frequency or impact of losses, such as improving safety protocols or providing employee training. By investing in risk reduction efforts, management can potentially decrease the occurrences of uninsured losses, thus demonstrating their controllability.

In contrast, prepaid fuel, maintenance fees, and employee salaries typically do not fall under the category of controllable costs in the same manner. Prepaid fuel is generally a fixed cost once purchased, maintenance fees are contractual obligations, and employee salaries are often dictated by contracts or market conditions, making them less flexible in the short term. Therefore, the ability to influence uninsured losses through targeted decisions highlights why they are recognized as controllable costs within business operations.