Are discretionary costs fixed?

Are discretionary costs fixed?

A discretionary fixed cost is an expenditure for a period-specific cost or a fixed asset, which can be eliminated or reduced without having an immediate impact on the reported profitability of a business.

Why discretionary fixed cost is called managed fixed cost?

Discretionary fixed costs, otherwise known as managed costs or programmed costs, result from policy decisions made by managers. Unlike committed costs, discretionary fixed costs tend to change over time. Managers usually set these costs at a fixed amount each year.

What would be an example of a discretionary fixed cost *?

Examples of discretionary fixed costs include advertising, research, public relations, management development programs, and internships for students. Discretionary fixed costs can be cut for short periods of time with minimal damage to the long-run goals of the organization. Basically a fixed cost that isn’t long term.

Are discretionary fixed costs long term?

Discretionary vs Committed Fixed Costs Committed fixed costs are costs that a business has already made or obliged to make in the future; thus, cannot be recovered. Discretionary fixed costs have a short-term planning horizon. Committed fixed costs have a long-term planning horizon.

What are committed fixed costs?

Committed fixed costs: These are multiyear organizational investments that cannot be easily changed. Examples of committed fixed costs include investments in assets such as buildings and equipment, real estate taxes, insurance expense and some top-level manager salaries.

What are committed fixed costs quizlet?

Committed fixed cost. a cost that cannot be changed in the short run; usually a cost that is set by someone else or because you are in contract. Committed fixed cost (example) depreciation, salaries of upper management, long term equipment leases, property taxes. Only $35.99/year.

What is a committed fixed cost?

Are fixed costs always fixed?

Why are Fixed Costs Not Always Fixed? Fixed costs may not change based on production or sales, but they are not ‘fixed’ in stone either. For example, rent (a fixed cost) may increase once the lease is up.

What is a discretionary cost?

A discretionary expense is a cost that a business or household can survive without, if necessary. Discretionary expenses are often defined as nonessential spending. Meals at restaurants and entertainment costs are examples of discretionary expenses.

What are discretionary fixed costs quizlet?

What are DISCRETIONARY FIXED COSTS? are fixed costs that can be changed or avoided relatively easily at management discretion. For example, advertising is a discretionary fixed cost. Advertising cost depends on the decision by management to purchase print, radio, or video advertising.

Which of the following are fixed costs?

Fixed expenses or costs are those that do not fluctuate with changes in production level or sales volume. They include such expenses as rent, insurance, dues and subscriptions, equipment leases, payments on loans, depreciation, management salaries, and advertising.

Which of the following is also known as fixed cost?

Answer: Fixed costs are also known as overhead costs, period costs or supplementary costs.

What does committed cost mean?

COMMITTED COSTS Definition. COMMITTED COSTS are costs, usually fixed costs, which the management of an organization has a long-term responsibility to pay. Examples include rent on a long-term lease and depreciation on an asset with an extended life.

A discretionary fixed cost varies from a committed fixed cost, in that a committed cost obligates a business to continue making payments over a certain period of time (such as the lease on an office building). A discretionary fixed cost is also known as a managed fixed cost.

What are fixed and variable expenses?

Fixed and variable expenses are the two main components of a company’s total overhead expense. Fixed costs are those that do not fluctuate with changes in production activity level or sales volume, such as rent, insurance, dues and subscriptions, equipment leases, payments on loans, depreciation, management salaries, and advertising.

What are some examples of discretionary spending?

Discretionary spending. This spending is an optional part of fiscal policy, in contrast to entitlement programs for which funding is mandatory and determined by the number of eligible recipients. Some examples of areas funded by discretionary spending are national defense, foreign aid, education and transportation .