Control of expenses

The classification of expenses helps in controlling expenses.
Fixed expenses are said to be sunk costs as these are incurred irrespective of the level of
production activity and they are regarded as uncontrollable expenses. Since variable
expenses vary with the production they are said to be controllable. By this classification,therefore, responsibility for incurring variable expenses is determined in relation to activity
and hence the management is able to control these expenses. The departmental heads
always try to keep these expenses within limits set by the management.