Reference no: EM131641108

There are additional cost classifications that managers generally consider. For example, when they are planning for exclusively variable cost items, the cost driver activity expected for each period provides the underlying function. On the other hand when planning for many fixed cost items managers must consider the time frame as it becomes the primary underlying a function. There are two basic types of fixed costs that must be considered in conjunction with the timeframe perspective - committed costs and discretionary costs. A committed cost is expected to be incurred in conjunction with the execution of the company's long-range policy decisions which policy the firm has "committed" itself to follow. A discretionary cost can be adjusted during the short range period; this generally means annually. This cost is considered in conjunction with the available resources and is used as part of the prioritization of annual budget requests. What examples can you think of that are generally committed costs? Explain. What about examples of discretionary costs? Explain.