Which statement regarding committed and discretionary fixed costs is true?
A)Discretionary fixed costs preserve management's flexibility.
B)Committed fixed costs preserve management's flexibility.
C)Both discretionary and committed fixed costs preserve flexibility.
D)Both discretionary and committed fixed costs limit flexibility.

Question

Quizplus · Accepted Answer

Committed fixed costs are those that cannot be easily adjusted or reduced in the short term, such as rent or salaries. Discretionary fixed costs, on the other hand, are those that can be adjusted more easily, such as advertising or employee training. The statement that discretionary fixed costs preserve management's flexibility is true, as they provide managers with the ability to adjust spending to reflect changing business needs or economic conditions. Committed fixed costs, while necessary for the ongoing operation of the business, limit flexibility as they must be paid regardless of changes in sales or other factors.

Which Statement Regarding Committed and Discretionary Fixed Costs Is True