Question: Is Salary A Discretionary Fixed Cost?

Are wages a variable or fixed cost?

Variable costs vary with increases or decreases in production.

Fixed costs remain the same, whether production increases or decreases.

Wages paid to workers for their regular hours are a fixed cost.

Any extra time they spend on the job is a variable cost..

What are discretionary costs?

What Is a Discretionary Expense? The term discretionary expense refers to a cost that a business or household can get by without, if necessary. Discretionary expenses are often defined as nonessential spending or, in other words, wants rather than needs.

What are examples of variable costs?

Examples of variable costs are sales commissions, direct labor costs, cost of raw materials used in production, and utility costs. The total variable cost is simply the quantity of output multiplied by the variable cost per unit of output.

What are two types of expenses?

Different Types of Expenses There are two main categories of business expenses in accounting: Operating expenses: Expenses related to the company’s main activities, such as the cost of goods sold, administrative fees, and rent. Non-operating expenses: Expenses not directly related to the business’ core operations.

What are mixed costs?

Mixed costs are costs that contain a portion of both fixed and variable costs. Common examples include utilities and even your cell phone!

What is a step cost?

Step costs are expenses that are constant for a given level of activity, but increase or decrease once a threshold is crossed. Step costs change disproportionately when production levels of a manufacturer, or activity levels of any enterprise, increase or decrease.

Is an example of a discretionary fixed cost expense?

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 committed and discretionary fixed costs?

Discretionary vs Committed Fixed Costs Discretionary fixed costs are referred to as period specific costs that can be eliminated or reduced without having a direct impact on profitability. Committed fixed costs are costs that a business has already made or obliged to make in the future; thus, cannot be recovered.

How do you calculate avoidable costs?

An avoidable cost is a cost that is not incurred if the activity is not performed. Put another way, a company can avoid the cost if they no longer produce the good or service. For example, the cost of materials that go into a finished good is an avoidable cost.

What are examples of fixed cost?

Examples of fixed costs include rental lease payments, salaries, insurance, property taxes, interest expenses, depreciation, and potentially some utilities.

What is committed fixed cost?

Fixed costs can be further identified as: 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 discretionary fixed costs?

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. … The following can be considered discretionary fixed costs: Advertising campaigns. Employee training.