What are discretionary fixed costs?
What is a Discretionary Fixed Cost? 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.
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.
What is meant by discretionary fixed cost and committed fixed cost?
Committed fixed costs are those costs which are fixed obligations of the business and must be incurred to maintain continuity of operations. Discretionary fixed costs are those costs which are optional to the extent that their incurrence and value is determined by budgeting exercise of the management.
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. This means a business or household is still able to maintain itself even if all discretionary consumer spending stops.
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.
What are the characteristics of discretionary fixed costs?
9 are the characteristics of discretionary fixed costs? They vary directly and proportionately with the level of activity. They have a long-term planning horizon, generally encompassing many years. They are made up of plant, equipment, and basic organizational costs.
Which is an example of a discretionary fixed cost for a clothing manufacturer?
An example of a discretionary fixed cost would be: 4) research and development.
How do committed fixed costs differ from discretionary fixed costs quizlet?
Discretionary fixed costs are fixed costs that can be changed or avoided relatively easily at management’s discretion. Committed fixed costs, on the other hand, are fixed costs that cannot be easily changed. Variable costs are costs that in total vary in direct proportion to changes in output within the relevant range.
What does discretionary mean in finance?
The term “discretionary” refers to the fact that investment decisions are made at the portfolio manager’s discretion. This means that the client must have the utmost trust in the investment manager’s capabilities.
Are groceries fixed or discretionary?
To determine whether something is a discretionary expense, consider whether it’s a want or a need. You need food, but you don’t need it to come from a restaurant. So, groceries are a variable expense, but dining out is a discretionary expense.
What are discretionary items?
Discretionary spending refers to non-essential items, such as recreation and entertainment, that consumers purchase when they have enough income left over after paying the necessary expenses such as the mortgage and utilities.
Is gas a discretionary expense?
Although variable costs are quite often discretionary expenses, some may be necessities. Buying gas for your car each month is a variable expense, as are car repairs and maintenance. Grocery shopping is also a variable expense.
What are committed fixed costs?
Committed fixed costs, otherwise known as capacity costs, are the costs required to maintain current production capacity. These costs arise from long-range decisions made by top managers about the size and nature of their organization.
What is discretionary and examples?
The definition of discretionary is something that you use as desired or needed. When you have petty cash available to you to use, the money you spend is an example of discretionary spending.
What is the difference between discretionary and non-discretionary accounts?
A discretionary account is an account that gives an investment adviser the authority to make individual trades without the consent of their client. A non-discretionary account is an account where the client always decides whether or not to conduct a trade.
What is the difference between discretionary costs and non discretionary costs?
Non-discretionary spending is essential and non-negotiable spending defined within a budget. What are Non-Discretionary examples? Examples of these expenses include: rent, food, or mortgage payments. In contrast, discretionary spending refers to non-essential expenses, such as hobbies and travel.