Which of the following is an example of a committed fixed cost?
A) A training program for salespersons.
B) Executive travel expenses.
C) Property taxes on the factory building.
D) New product research and development.

Question

Quizplus · Accepted Answer

Committed fixed costs are expenses that a company incurs as a result of its investment in property, plant, and equipment. Property taxes on the factory building are an example of a committed fixed cost because they are not affected by changes in the level of production or sales.

The other options are not examples of committed fixed costs. A training program for salespersons is a variable cost because it can be cut back or eliminated if sales are slow. Executive travel expenses are also variable because they can be reduced by limiting the amount of travel. New product research and development is a discretionary cost, which can be deferred or eliminated altogether if resources are scarce.

Which of the Following Is an Example of a Committed