Differentiate Between Committed Costs and Discretionary Costs

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The Answer is A committed cost is a ﬁxed amount that stems from an organization's ownership or use of facilities, and its basic organizational
structure.Property taxes, rent, and salaries of top management are examples of committed costs.
A discretionary cost, also a ﬁxed amount, occurs as a result of a management decision to spend a particular amount of money for some
purpose.Examples are advertising, training, promotion, and contributions to charitable organizations.
The distinction between committed and discretionary costs is that committed costs can be changed only by major decisions with long-
term implications.Discretionary costs can be changed in the short run and, thus, are cost-cutting targets should an organization
encounter ﬁnancial diﬃculties.

Differentiate Between Committed Costs and Discretionary Costs

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Differentiate Between Committed Costs and Discretionary Costs

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Correct Answer:
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